What does a piecework pay plan involve?

A piecework pay plan involves compensation that is directly tied to the amount of work completed, specifically based on units produced or tasks accomplished. This system rewards employees for their productivity, meaning that the more they produce, the more they earn. It aligns the interests of the employer and employee, as increased output can lead to higher earnings for the worker while also benefiting the company through increased productivity.

In contrast, an hourly wage structure compensates employees based on the time they spend working, which does not necessarily incentivize higher output. A fixed salary provides a set amount regardless of individual performance or output, lacking the performance incentives inherent in a piecework system. Commissions based on total sales reward employees for sales performance but do so through a different metric that does not directly link to task completion or production in the same way as piecework does.