Complex Pay Strategies

Posted by Christy Putnam on September 12, 2018 at 10:55 AM

Complex Pay StrategiesNot all compensation is as simple as an hourly wage or a set salary. Following are some pay types that may cause questions and confusion.

Piece Rate Pay

What is “piece rate” pay? This is an alternative system of pay that may benefit both the employer and the employee. Employees are paid based on the per unit of quality work completed rather than an hourly rate. This approach has the dual advantages of helping to increase productivity while providing employees with rewards for extra effort. This form of pay is commonly used in construction and agriculture.

Regulations for piece rate pay were developed by the Fair Labor Standards Act (FLSA) and are administered by the Department of Labor. One thing to note about these regulations is that worked time records must be maintained even though employees are not paid an hourly wage in order to assure employees are making at least minimum wage. If employees are not making at least minimum wage per hour worked, the employer must pay the difference in wages to the employee. Employees are also entitled to overtime for any hours worked over 40 per week.

Multiple Pay Rates

In today’s world, it's not uncommon for people to perform multiple jobs, and those different jobs often pay different rates. Restaurant workers provide a good example of this arrangement. An employee who buses tables and also works as a dishwasher may earn a different hourly wage depending on what job s/he is scheduled for. When determining overtime for someone with multiple pay rates, a weighted average (all earnings divided by the number of hours worked to get the hourly overtime rate) of the rates must be utilized.

Non-Discretionary Pay

The Department of Labor defines non-discretionary bonuses as “those that are announced to employees to encourage them to work more steadily, rapidly or efficiently, and bonuses designed to encourage employees to remain with a facility.” Non-discretionary bonuses are achieved when established standards or goals like production, sales, or attendance have been met, and they are paid on a routine basis. Non-discretionary bonuses must also be included in the regular rate of pay when determining an overtime pay rate.

If you have complicated pay policies and your processes and systems are very manual, a Human Capital Management system like People Savvy HCM can help you keep track of things and even automate those non-standard pay strategies. Contact us today, and we can discuss how to increase your organization's efficiencies and accuracy.

Topics: Human Capital Management, Payroll

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