Which payment system is better for sewing operators in garment manufacturing - Piece Rate or Salary based?


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When entrepreneurs start business in garment manufacturing and garment exports, they look for a fair payment system that would motivate their workers as well as factory can save good money out of the business. Whether payment system is salary based, piece rate or incentive system. Researchers and experts say that all payment systems have good things with certain challenges. After all, employers have to understand what motivates their employee. Is it money, Job satisfaction, Position and/or recognition?



In this article I am discussing about sewing operators and get motivated by money only. When operators are paid according to the work done (pieces) by them with an agreed rate only then they will work with maximum effort. In other way it may be said that factory will only able to produce target quantity of garments when their employees are fully motivated.

Prior to choosing a pay system, following factors must be considered. In the following table, comparison of the piece rate and salaried system has been explained on eight parameters.

Parameters
Salaried
Piece rate
Labor rate per pieces
Lower
Higher up to 45%
Cost per piece depends on
Work content
Marketplace
Operator focused on
Quality
Quantity
Attrition rate
Lower
Higher
Capacity
Fixed
Varies with Labor availability
Product Change
No. problems
Price negotiation
Advance Technology
Welcome
Restricted
Work study
Welcome
Restricted
Source: Presentation by Methods Apparel at OGTC conference, 2011

Now factory management has to decide how they want to run their business. What their priority is? Is it quality or quantity? Are they wanted to run the factory with fixed or varied capacity? Do they want stable operators or it does not matter to them?

In the context of Indian exporters, they are still quantity conscious than quality, though they are losing lot of money due to poor product quality every day. Indian exporters mostly prefer to have “Piece Rate System”.
Benefits of “Piece rate” employees:
  • Piece rate employees are highly motivated. 
  • Piece rate employees have no obligation about their employer. 
  • When factories have no work, they do not have to pay operators.

Challenges for having piece rate employees: There are few challenges when company hires “piece rate” employees.
  • Design a fair rate for piece rate employees is most critical. 
  • Most of the factories don’t have system to establish fair rate or standard time. 
  • Generally rate is decided by negotiation employee and employer. 
  • Until rate is fixed nobody work at their normal pace and company loses capacity.
Related Articles:
Different types of incentive systems
Garment production systems
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