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January 28, 2016

New California Piece Rate Is in Effect—Are Your Clients Compliant?

New California Piece Rate Is in Effect—Are Your Clients Compliant?

By Kit Dickinson on January 28, 2016


As you may have heard, effective January 1, 2016, the State of California changed legislation on how companies that pay piece rate need to pay and report earnings to their employees. The changes were approved by Governor Jerry Brown as part of Assembly Bill 1513 (AB 1513) California Labor Code Section 226(a), which requires that each piece-work-compensated employee receive the following each payroll:

  • A wage statement that contains gross wages earned
  • Total hours worked by the employee
  • The number of piece rate units earned and any applicable piece rate, if the employee is paid on a piece rate basis
  • All deductions, net wages earned, and other reported elements

The bill further states that piece rate employees must be compensated for rest and recovery periods and “other nonproductive time.” In addition, it is now required that such compensated time must be reported on the employee’s itemized wage payment statement, separate from the piece rate compensation.

Legal Fallout for Non-Compliant Piece-Rate Companies

What this boils down to is that companies that pay piece work as part of their overall compensation policy are legally required to track, report, and pay employees at a much more detailed level than ever before—or risk legal action.

We’ve worked with many piece-work clients in California and other states. At the time, the projects involved calculating the employee pay and posting either the hours wages vs. piece work earnings to payroll (whichever was higher). The number of pieces and applicable piece rate were not included. Some companies paid workers arbitrarily (or not at all) for rest, recovery, and non-productive time.

With the new and enhanced reporting and pay requirements, these same companies are now under the microscope. The new laws will likely create more lawsuits by employees, unions, or the state of California.

A Great Opportunity for HCM Companies

To help your California clients that pay piece work, take advantage of this opportunity to educate them. Ask these four questions:

  1. Are they aware of this new legislation, and have they reviewed their practices with their labor attorney?
  2. Do their current time entry and piece capture systems gather the level of detail needed to support the new California requirements?
  3. Can their time, production, and payroll systems calculate the proper piece earnings and non-production pay in accordance with the new law?
  4. Can their payroll system provide the pay stub detail now required with Assembly Bill 1513?

If there’s any doubt about their current system’s ability to automate their piece rate policy and meet California’s new standards, IDI can complement your HCM solution to help your client stay compliant with this new regulation—so they can focus more on producing their products and less on potential legal problems.

Next Steps

Video: Discover how we help manufacturers automate payroll.
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