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

When entrepreneurs start a business in garment manufacturing and garment exports, they look for a fair payment system that would motivate their workers, as well as the factory, can save good money out of the business. Whether the 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 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 another way, it may be said that the factory will only able to produce a target quantity of garments when their employees are fully motivated.

Prior to choosing a pay system, the following factors must be considered. In the following table, a 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 a 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 a company hires “piece rate” employees.

• Design a fair rate for piece rate employees is most critical. 
• Most of the factories don’t have the system to establish a fair rate or standard time. 
• Generally, the rate is decided by negotiation employee and employer. 
• Until rate is fixed nobody work at their normal pace and the company loses capacity.

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Different types of incentive systems