Two methods for compensating employees for completed work are hourly and piecework. Piecework sounds, to me, the most fair and just method. You establish a unit price for installed work, and workers are compensated by the work completed. In short, they are justly compensated. Workers that are more productive are paid more. This system tends to punish poor workers and reward good ones. What could be more equitable and fair? An added benefit is that piecework establishes a fixed unit price for goods installed—a win-win scenario. Hourly workers are paid by the hour, without regard to production rates. This can make estimating labor costs a challenge. However, there is more to this picture, and closer examination should make people rethink piecework as the end-all solution to the high labor cost.

A trade subcontractor is expected to have knowledge and skills about their craft. Profit should be derived from optimizing production, identifying potential problems and coordinating crews better than your competition. Proper sequencing, verifying materials/tools needed and removing obstacles for crews optimizes profits and provides a quality job for your customers. Moving to a piecework pay system can shift the paradigm. The advantage of being a superior subcontractor with knowledgeable and efficient supervisors can become a moot point.

Differences With Piecework

Picture the general contractor calling a subcontractor, needing a crew to start work. The hourly rate requires the supervisor to verify on-site and line out the materials required. As an expert in the craft, they have the potential to identify problems that are affecting production and quality.

In a piecework world, the call is often handled quite differently since the crews are only paid on completed work. They are often sent out without verifying that the demand to start is justified or clearing a path for the crews. Because this pay structure lowers risk by a set unit price, the supervisors can also be less expensive, as they are basically labor brokers. While this method can and has worked, there are pitfalls.

Problems With Piecework

Since piecework crews are only paid on what they install, they can tend to cover up work that should not be covered. This can be a real problem if the supervisor opts to be just the labor broker or lacks the skill of an experienced pro at identifying potential problems. Some owners claim, “A third-party inspector will walk and catch potential problems.” Maybe and maybe not. However, work moves on, and piecework crews cover it up fast. It is also hard to find inspectors who know the craft like skilled trade supervisors. That knowledgeable and skilled supervisor at a particular craft is of high value. Piecework tends to diminish their value. Nevertheless, there is more.

When work is slow, piecework can be attractive. Workers come to the shop, and since they are desperate, they drop their prices to feed their families. However, there is another side to this. They will quickly walk during good times if they do not get a higher piece rate. They also do not care that you have a set unit price that you are contractually obligated to pay. Subcontractors should be aware that being a labor broker means that anyone can do their job, and this should give a person pause to reflect.

The lack of supervisor expertise in the trades can lead to finger pointing with others on poor installation quality. A knowledgeable trade subcontractor is worth more than the best labor broker is. Building owners, architects and developers need to know that anyone can be a labor broker, claim to have the expertise or send people out to have bodies on the job site. Television shows seem to highlight builders who are great at marketing with a personality suited for television, but they often lack in knowledge or skills of the trades.

Why Use Piecework?

Piecework can work. However, it is not as easy as some think it would be. You still have to learn the craft, be knowledgeable enough to spot potential problems and have solutions in your pocket. This often means having workers you can trust, not ones you just think you can trust. It also means you will probably have to pay them more than the going piece rate. So do you win?

You may disagree with me, but that is your right. I hope this makes people think about the long-term consequences and that the easy solution may not be that easy. Architects and building owners may want to ask how the workers are paid. Will they be the quality worker they expected? Instituting piecework over the hourly wage can have long-lasting impacts on a company and even the industry. I am reminded of the old saying, “Be careful what you wish for.”