How to Justify the Piece Rate in the Garment Industry?

You know, many garment companies calculate workers payment based on the operation piece rate. This payment system is widely used across the globe. Secondly, this is a very simple way of calculating workers payment, once the piece-rate is agreed. Garment companies decide the piece-rate per garment per operation after the style is loaded to a production line. My question is, how do you justify the garment piece-rate that is agreed between the worker and the company management?

Garment piece rate

It is true that workers are motivated by the piece-rate payment system. Operators earning is directly related to their production qty. The factory management also gets confidence that workers will work at their maximum speed to earn more money. Factory owners feel satisfied that their workers are motivated.

How the piece-rate is derived for a stitching operation?

In most cases, piece rate is finalized after a negotiation with operators, contractor and calculate daily earning capability of their operators (Number of prices stitched x piece-rate per garment). Normally, operation rates are finalised within 2-3 days of production start.

The factory needs to ensure that they give a whole day’s salary to their piece-rate workers. When the piece-rate is set, the factory considers the daily minimum salary to earn by operators. Order qty in a style. Operation handling difficulty. Handling of a special machine.

A factory studies garment operations and operator's production rate in initial 1-2 days. They assess the operator’s production rate in a number of pieces they can produce when they are provided with an uninterrupted feeding of cuttings (bundles). According to that operation-wise piece-rate are derived. For example. if you need to provide minimum daily earning equivalent to INR 300 and if an operator can make 600 pieces (in one operation) in a day, piece-rate for that operation would be INR 0.50 (300/600). This formula is used as a benchmark of the Piece-rate.

How to estimate possible piece rate for an operation without having a work-study team?

The piece-rate amount can be justified by using capacity study and operation cycle time. Here is the guide to justify whether your price rate of garment operations is higher or less. This guide is specially developed for companies who don't assign Standard Time (SAM or SMV) to the garment operations and don't have industrial engineering team.

  1. Let the operator work for one full day in the operation for a new style. If you think, an operator can't reach normal speed in one day, you can give them two days time for learning.
  2. Measure the average cycle time of the operation (take at least 10 consecutive operation cycle time). Use a template for capturing cycle time. If you have more than one operators working in the same operation, normally their production rate will be different. So, measure the cycle time of all operators and consider the lowest cycle time for the operation for calculating piece-rate.  
  3. From the cycle time calculate average operation cycle time
  4. Add 15% allowances on the average cycle time and calculate the given time for operations and convert it in minutes. (This allowance in machine delay, fatigues and personal need).
  5. Next, calculate per minute rate from the daily minimum wages of a skilled operator. Per minute salary rate = (Daily wages/480 minutes). (Standard daily wages are set in 8 hours work). In the example, the daily wage is considered as INR 300.
  6. Now calculate operation rate. Piece-rate = (Per minute salary x average cycle time). This is achievable piece-rate for the given operation.
  7. Now you have two data - The agreed piece-rate and calculated piece-rate derived from the average operation cycle time. Compare the two rates - and you will find which one is higher.
Use this as a measuring tool for garment piece-rate assessment.

Related: Calculate garment piece rate using the garment standard time (SAM)

See the following example of 3 operations. In the below table, Agreed piece-rate is named as Given Piece-rate. You can see the difference between the two rates. If the variation is very high, you may decide on revising the piece-rate. The average operation cycle time shows the potential production capacity of garment production.

Piece rate calculation format
Image: Cycle time data collection format + Piece-rate calculation 
By following the above method, you can justify your piece-rate of garment operations.

Related post: Piece-rate Vs Salary Payment

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