A piece rate is where an employee gets paid by units rather than hours. This means the employee gets a pay rate for the amount picked, packed, planted or made. It can also be used for people on set rates per task – an example would be a rate per milking.
This style of payment requires a different set up within PaySauce from the more common hourly or salary paid employee to ensure minimum wage requirements are met and holiday pay and accrual are correctly set.
This article covers:
Leave settings
Payment settings
Minimum wage requirements
Leave Settings
When you set up an employee being paid rate and quantity allowances only you need to consider how to pay or accrue holiday pay.
Casual
If your employee is casual and working short term, or on a fixed term agreement of less than 12 months, then you can agree to pay them their holiday pay each pay. This needs to be clear in any employment agreement.
For more information:
Permanent
There are two options for employees that need to accrue leave so they can take paid holidays.
Standard hours
You can put the employee onto a Standard Hours setting that relates to the average hours and days they might work in a pay period. This will calculate their leave for them to be able to take four weeks of paid leave based on a standard number of hours and days per pay period.
It can be difficult to calculate this on an employee who is paid by rate and quantity allowances, however, if you have some idea of how many days on average and how many hours on average they will be working it this setting will suit.
For example – if you have someone who comes in every week for 3 days to do a morning and afternoon milking and you know that a morning milking takes 3 hours and an afternoon one 2 hours and you pay weekly, you can calculate a standard number of hours that employee will be working as 5 hours per day x 3 days per week for a total standard hours of 15 hours over 3 days. If you were paying fortnightly, you would set the standard hours to 30 over 6. When your employee takes leave, they would be paid for 5 hours for that day of leave at an average rate of their earnings. This sort of set up needs to be checked regularly to ensure it remains accurate.
Varied Hours
If you cannot determine a standard number of hours for the employee it can be better to use the varied hours setting, but it means that you must have a way of recording the actual hours and days the employee works.
PaySauce has a great feature to do this: a zero rated timesheet. Data can be entered by either the Employer or the Employee (if invited to use the PaySauce mobile app).
Using a zero rated Timesheet gives you the ability to accurately record the hours and the number of days an employee has worked without creating an hourly payment to them. It is also valuable to ensure that the employee is being paid in accordance with minimum wage requirements used in conjunction with our PayCard Topup feature.
Instructions for all of entering all of these leave settings can be found in our Add an Employee article.
Payment Settings
Before you start, it is important to check that the rate being paid excludes holiday pay as PaySauce will calculate and add on holiday pay to the amount you enter as the rate.
For example, if you are paying a picking rate of 0.20c per kilo check your employment agreement to see if that includes holiday pay. If it does, then you need to reduce the rate paid in your payment line by dividing it by 1.08. So, 0.20c / 1.08 = 0.185c per kilo.
More information is available in this extensive article about calculating rates which are inclusive of holiday pay and/or KiwiSaver.
Setting up a rate and quantity payment
Go to Employees and select the employee (if you are not already in the add employee process).
Click on the Payment tab and click on the + sign above Actions on the right-hand side.
Select Rate and Quantity from the Rule drop down.
Type in a Title for the payment. Be quite specific if you are using multiple allowances, for example Apples per kg rather than Fruit Picking.
Taxable is generally Yes.
Do not tick on the box beside This payment is NOT to be included in Kiwi Saver calculation.
Frequency is Variable (so that it can be entered each pay)
If you have a jobsheet set up for this piece rate, Select Use Template Yes and select the Jobsheet required from the drop down. If you are not using a jobsheet, leave as No for Use Template.
Enter the Rate.
Set the Quantity to 0.
Click Ok.
You can add multiple allowance lines as required.
Minimum wage requirements
An Employer must show compliance with minimum wage requirements. You must be able to show that for the time worked the employee received payment at least the minimum wage.
When an employee is not paid hourly or via salary you still need to be able to record what hours they have worked and divide that by the money they are receiving to ensure they have received minimum wage for each hour worked in the period.
To achieve this, you can add two things to the payment set up of your employee – a zero-rated timesheet to record any hours worked and PayCard Topup. The instructions on how to set these up are here: