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Piece rate pay brings mixed results for garment workers, new study shows

20 Dec 2018

An International Labour Organization (ILO) study shows that while payment by performance can bring higher wages, poorly designed piece rate systems have negative impacts on workers

GENEVA, 30 Nov – Garment industry workers are more likely to be concerned with sexual harassment and verbal abuse and more worried about workplace accidents and injuries if they are paid partially by the piece rather than by the hour, according to new research published by the ILO.

A discussion paper, Piece rate pay and working conditions in the export garment sector, explored the impact of piece rate pay on wages and working conditions, using data from around 6,000 workers employed in garment factories in Vietnam, Indonesia, Jordan, Haiti and Nicaragua. The factories are all registered with Better Work, a flagship ILO programme jointly managed by the International Finance Corporation, which improves working conditions and competitiveness in the global garment industry.

The research found that workers whose pay is jointly determined by hourly pay and a piece rate (described as partial piece rate pay) are more likely to report reduced emotional and physical health compared to workers paid by the hour. Typically in these systems, workers receive the hourly base salary, which is often very low, and the incentive pay, based on the output, is obtained only if a certain output threshold is reached.

According to the paper, workers whose pay is fully determined by a piece rate are not negatively impacted, suggesting that uncertainty or unpredictability in how payments are determined may be the driving factor of these detrimental effects.

“Workers who are on a combination of pay types are concerned by the variability of their wages and a lack of transparency in how their wages are put together,” says lead author Floriana Borino. “These concerns can lead partial piece rate employees to work much harder, sometimes making their employment more strenuous and impacting their emotional and physical health,” she added.

The analysis also showed that workers in partial piece rate systems reported being less comfortable seeking help from supervisors and less likely to be treated with respect and fairness from their supervisor.  Partial piece rates workers in Vietnam were also more likely to report overall lower life satisfaction.

While piece rate work was shown to be correlated with higher hourly wages in Vietnam, Indonesia and Jordan, the paper cautions that Better Work-registered factories are not always representative of a country’s working conditions and that other subcontracting factories may not operate with the same standards.

In addition, the Better Work results on wages stand in contrast to analysis the author conducts of other labour force surveys and research in garment and similar sectors, where many piece rate workers are founds to earn less and work more than their hourly paid counterparts. In Haiti (where 83 per cent of workers are on piece rate or partial piece rate pay) and Nicaragua piece rate work was not associated with higher wages for garment workers.

Patrick Belser, Senior Economist with INWORK said of the findings: “Piece rate can be a win-win for both employers and workers, but it needs to be designed in a fair way that is consistent with decent work objectives. Involving workers and trade unions in the design of pay regimes will go a long way to offset some of the negative impacts of piece rate wage systems.  There is also a role for governments to provide a robust legislative framework and to ensure that all workers, including those who are paid piece rates, earn at least the minimum wage.”

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