Piece rate

A business should choose the appropriate form of payment based on the demand for labor and the nature of the work. Companies can choose to pay by the piece to improve their productivity. So what is piecework?

1. What is piece rate?

The Labor Code 2019 and guidance documents do not have a specific definition of piecework pay”, but this term is mentioned in many provisions and regulations on forms of payment.

Accordingly, piecework is the form of payment based on quantity, quality and time of performance, applied by the employer to calculate and pay the employee.

According to Clause 1, Article 96, Labor Code 2019, the employer and the employee must come to an agreement on the form of wage payment: based on time, product or piecework.

Therefore, the employer can pay the piece rate with the consent of the employees.

The employee may receive piece rate based on the level of completion. And the employee receives payment of the maximum and full salary in accordance with the provisions of the law. This is a fair wage and represents the productivity of the employee.

Piece rate based on quantity, quality and turnaround time (Illustration)

2. Forms of piecework

According to Clause 1, Article 54, Decree No. 145/2020/ND-CP, based on the characteristics of jobs and production and business conditions, employers and employees must reach an agreement on the form piecework wages.

In this framework, the payment of real wages is based on time, product or piecework in employment contracts.

The following formula is an example:

salary

=

Piece rate

X

% of work completed

For example: Ms. A is hired to pack masks with the requirement that she must make 10,000 boxes of masks every month, then they will be paid 6 million VND. However, she packed 8,000 boxes of masks, taking 80% of the required quantity, so Mrs. A will receive the piece rate as follows:

6 million VND x 80% = 4.8 million VND

3. What are the forms of piecework?

The principles of payment of piecework wages are prescribed in Article 94 of the Labor Code 2019, the employer must pay wages directly, in full and in a timely manner to employees. In the event that the employee cannot collect the salary directly, a person legally authorized by the employee can collect the salary.

In accordance with Clause 2, Article 94, Labor Code 2019, and Clause 2, Article 54, Decree 145/2020/ND-CP, piecework wages are paid in the following forms:

– In liquid

– Via employees’ personal bank accounts

In case salaries are paid through personal bank accounts, employers have to pay the fees related to the opening of the account and the bank transfer.

To note: Salaries must be paid in Vietnamese dong. Salary can be paid in foreign currency for foreigners working in Vietnam.

Piece rate
Employers must pay account fees (Illustration)

4. Does an employee receiving a piece rate have to contribute to social insurance?

According to Clause 1, Section 2, of the Social Insurance Act 2014, persons working under fixed-term employment contracts with a duration of 01 months and above are covered by compulsory social insurance .

We note that the duration of the contract between the employee and the employer decides whether or not to be covered by compulsory social insurance.

Monthly salaries on which social insurance premiums are set in accordance with Clause 26, Article 1, Circular No. 06/2021/TT-BLDTBXH as follows:

Monthly salaries = salaries + salary allowances + other additional amounts

In this context, in accordance with the guidelines of point a, clause 5, article 3, circular n ° 10/2020 / TT-BLDTBXH, the salary based on the employment or the title means the salary calculated according to the duration of this employment. or title under Salary Grids and Salary Grids. For an employee on a product or piece rate wage, this is the time wage level used to determine the unit cost of the product or piece rate.

Here is the answer to the question: What is piece rate?

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