Key takeaways:
Here’s what home service pros need to know about piece rate pay and if it’s the right fit for their business.
- Piece rate pay rewards efficiency and output. Employees are paid a set amount per job completed, which can motivate them to work quickly and efficiently, especially for straightforward, repeatable services.
- Job costing and profit margins become clearer. Paying per completed job helps keep job costs predictable and easier to track, making it simpler to manage profit margins.
- There are legal considerations with piece rate pay. To comply with labor laws, total pay must at least match minimum wage for all hours worked, overtime must be calculated separately, and records must be accurately kept.
- Piece rate isn’t perfect for every situation. It works best for standard, repeatable tasks, but can lead to burnout, inconsistent pay during slow seasons, and isn’t ideal for complex or variable jobs.
- You can use a hybrid approach for flexibility. Many service businesses combine piece rate pay with hourly wages or bonuses, providing stability while still rewarding high performance.
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If you’re struggling to make the profit you need to cover wages, bills, and other expenses, it might be because of how you pay employees.
While hourly pay is the default for most home service business owners, it’s not always the best way to compensate staff. Other options, like piece rate pay, make it easier to track exact job costs, keep profit margins in check, and increase team productivity.
Use this guide to learn what piece rate pay is, how it works, and whether it’s a good option for your service business.
Piecework pay in home service businesses:
What is piece rate pay?
Piece rate pay is when employees and subcontractors are paid a flat rate per job instead of an hourly wage. It works well for straightforward, repeatable services, like mowing a lawn, cleaning a furnace, or detailing a car.
Home service pro, Mike Gore-Hickman, shares his take on the Masters of Home Service podcast, “For project-based services like painting or installs, I highly recommend moving to a piece rate system. And when I say piece rate, that basically means paying a set amount for the project.”
For example, if you charge clients $75 for standard mowing, piece rate pay means your crew earns the same amount for each job, no matter how long it takes. If one of your workers finishes six lawns in one day at a piecework rate of $40, they take home $240, and you’re left with $210 from the $450 total.
To be considered a legal form of employee compensation, piece rate pay:
- Has to be equal to or greater than minimum wage for all hours worked, not just jobs completed
- Can’t include overtime, which should be calculated and paid separately
- Needs to be tracked and documented for accounting and tax purposes
- Must follow the Fair Labor Standards Act and comply with state and local labor laws
Piece rate pay vs hourly pay
Piece rate pay and hourly pay are both common ways to pay staff, but which you use depends on the services you offer and the jobs you book.
Piece rate pay:
- Offers staff a fixed fee per service
- Impacts daily earnings based on how many jobs are completed
- Keeps job costs consistent
Hourly pay:
- Is fixed per hour worked
- Doesn’t change per job, service, or workload
- Is less predictable for determining job costs because it’s more variable and depends on job duration, downtime, and employee efficiency
Piece rate pay typically works best for basic, predictable tasks, while hourly rates are better suited for complex or variable jobs and projects.
For example, if you have a pressure washing business and you charge clients $100 per standard driveway cleaning, your piece rate may be $50. If a worker completes four driveways in a day, totalling $400, you would each take home $200.
But for unpredictable work where the job time can vary, like pressure washing an outdoor living space with a mix of tile and wood and stubborn mildew, paying hourly may be a better option. This ensures your employee is fairly compensated for the time they put in.
For instance, if you charge the client $600, pay your employee $20 an hour, and the job takes ten hours to complete, they make $200 and you keep $400. If it’s easier than expected and only takes six hours, they make $120 and you keep $480.
Pros and cons of piece rate pay
Piecework pay comes with perks and pitfalls. Before you add it to your employee compensation strategy, review these pros and cons to ensure it’s a fit for your services.
Piece rate pay pros
Piece rate pay comes with some significant benefits, including:
1. Motivating employees
Piece rate pay lets employees increase their earnings by taking on more jobs. The faster and more efficient they are, the more they can earn.
I’ve had crews start new projects at one o’clock on Friday because that’s how motivated they were with piece rate.
2. Improve the quality of work
Not only can it boost productivity, but it can improve the quality of work as well.
Mike shares, “The nice thing about piece rate is that the team is responsible for any go-backs or touch-ups, right? So if there are any go-backs, any touch-ups, it comes out of the fixed hour budget. That incentivizes them to not just be quick, but to be thorough and to make sure that you don’t leave any touch-ups.”
If you manage to balance speed with top-tier work, piecework compensation can be a great option for your service business.
3. Better job costing
Job costing is when you price out exactly how much a job will cost based on past work using service pricing, labor costs, materials, and overhead. It’s essential to understand how much profit you’re bringing in.
Using piecework rates (for standard or straightforward jobs) improves the accuracy of job costing by keeping profit consistent and predictable.
For example, a junk removal business charges customers $200 per load and pays piecework employees $90. Their overhead costs, like dump fees, fuel, business insurance, and field service management software, come to $50 per job.
That makes the total cost per load $140, leaving you with $60 profit and a clear, consistent, and reliable way to track earnings without guesswork.
4. Rewarding top performers
With piece rate pay, the better your employees are at completing high-quality work quickly, the more money they can make. That means your top performers have the chance to increase earnings, rewarding them for their efficiency and productivity.
And more jobs done means more profit in your pocket.
Piece rate can be really, really good for qualified people.
Just make sure quality control is still a priority. Fast shouldn’t mean sloppy. Mike Gore-Hickman keeps standards high with his painting crew by making sure his employees are part of the job from start to finish.
“A lot of people don’t like piece rate because you get bad quality, but if the painters are the ones doing the walkthrough, having to face that homeowner, look ’em in the eyes, this is my work, they’re going to be a lot more likely to do a good job.”
5. Reduced downtime
When you pay an hourly wage, you end up paying for downtime, like extended lunches, long drives, and delays.
Because piece rate workers only get paid for a job done, costs like breaks, travel, and wait times are baked into the rate. That means you only pay for the time your crew spends actively working.
Piece rate pay cons
Piecework rates do come with downsides, though, such as:
1. Burnout
Piece rate pay encourages employees to do more jobs, faster. But if they’re a recent hire, learning a new skill, or just someone who prefers to take their time, it can lead to burnout.
It only makes sense for seasoned pros who are comfortable and confident with a faster pace while maintaining quality standards.
You could burn your people out really fast with piece rate if you send inexperienced people to do a job really fast.
2. Inconsistent pay
Piece rate pay can lead to higher earnings and big paychecks in the busy season. But during slower months, your team might only get paid for one or two jobs a day. And if their piece rate is relatively low, like $25, that doesn’t amount to much.
To keep your crew motivated year-round, consider either providing a base hourly wage in the off-season or guaranteeing a minimum daily rate. That way, your employees will have income to rely on regardless of how full the schedule is.
3. Less flexibility
Piece rate pay is ideal for standard services, but it doesn’t work as well for long-term, one-off, or complex jobs.
For example, it can be a great fit for plowing a driveway, painting a room, or walking a dog. But it’s harder to apply to variable work like designing an outdoor living space, handling emergency plumbing repairs, or managing a bathroom renovation.
These kinds of jobs are less predictable and can change as the project evolves, making hourly billing a better option.
How to calculate piece rate pay
To set a fair piece rate per service, you’ll need to:
- Determine which of your services piece rates can work for, like repeatable, standard jobs
- Find your average cost per job through job costing
- Choose a desired profit margin
- Set a fair piece rate
For example, if you have a gutter cleaning business, you might offer standard debris removal and downspout flushing for a flat rate of $120. Job costing shows your non-labor costs, like travel, supplies, and overhead, are $30. With a profit margin of 33%, your business keeps $40, leaving you with $50 to offer as a piece rate.
Once you have a piece rate, you can use this formula to calculate piece rate pay:
Number of jobs completed x Rate per unit = Total pay
Here’s what that would look like applied to the gutter cleaning example:
15 gutters cleaned x $50 = $750 piece rate pay
Remember that the piece rate you offer must meet applicable minimum wage requirements in your state or region. So if you offer $50 per gutter cleaning and each job takes an average of 2 hours, including travel and wait time, you’re likely in the clear. But if you were to offer $10, it probably wouldn’t be enough to comply with local labor laws.
Piece rate employees are also entitled to overtime compensation, so you may need to increase their piece rate or pay for overtime separately if they go over 40 hours in a standard workweek.
In addition, you may want to offer incentives to promote quality work or bonuses, like getting a Google review.
That way, they won’t just focus on getting the job done as fast as possible. Instead, they’ll be motivated to prioritize quality and customer service.
Is piece rate pay right for your business?
Piece rate pay can work well if your business:
- Offers one-off, standard services that can be priced with a flat rate
- Prioritizes speed and efficiency
- Needs higher output during the busy season
It may not be the right choice if you:
- Take on long-term or complex jobs
- Need to meet quality standards, like building codes
- Have new or inexperienced workers
The good news is that you don’t have to choose between piece rate pay and hourly wages. Many service businesses use a hybrid model, offering hourly wages plus bonuses for completing specific tasks.
And with Jobber’s Gusto integration, balancing different compensation structures is easy. It automatically syncs timesheets and expenses, keeping payroll accurate, compliant, and on time, no matter how you pay your employees.