Managing harvest labour costs: Comparing piece rates, hourly wages, and bonuses
The introduction of a minimum wage floor for horticultural workers in Australia in 2022 saw a seismic shift away from paying piece rate toward hourly wages. It wasn’t unusual to hear cries of “piece rate is dead” or even “piece rate is illegal”. With labour costs continuing to rise, we examine what’s happening a few years on.
Growers are typically using one (or more!) of three pay methods: piece rate, hourly wages, or hourly wages plus bonuses. Below, we outline the advantages and challenges of each method.
Piece rate
Workers are paid based on how much they pick, e.g. by bin, tray, or kilogram. Piece rate is also applicable to non-harvest activities such as planting, pruning and thinning.
Pros
- Incentivises productivity: Faster workers can earn higher wages. Competition between workers can increase productivity.
- Efficient for long harvest shifts: Helps manage labour costs during peak yield periods.
- Attracts skilled workers: Experienced workers who can work quickly prefer piece rates.
- Faster harvest: Potential for higher earnings as top workers can earn well above hourly minimums. Produce gets to market at the optimum time.
Cons
- Quality concerns: Workers may rush, leading to damaged or improperly picked produce.
- Minimum wage liability: Workers who pick slowly may earn below minimum wage and require top-up payments. Workers can be disincentivised to perform when they achieve minimum wage regardless of performance.
- Potential for worker disputes: Competition can create tension among workers.
- Limited application: Cannot have more than one worker picking into each container (applies in Australia).
- Administrative complexity: Requires careful record-keeping and calculations to ensure minimum wage compliance.
Hourly pay
Workers are paid a set wage per hour, regardless of how much produce they pick.
Pros
- Worker security: Provides stable, predictable income.
- Quality focus: Workers may pay more attention to careful picking rather than speed.
- Reduced conflict: Less competition between workers over workloads.
Cons
- Reduced incentive: Workers may work more slowly without a direct financial reason to pick faster.
- Higher cost for low productivity: Growers pay the same rate for efficient and less efficient workers.
- Potential dissatisfaction among top performers: High-performing workers may earn less than under piece rates.
Administrative complexity: Requires careful tracking and calculations to ensure overtime compliance.
Hourly plus bonus
Workers receive a guaranteed hourly wage plus bonuses for exceeding certain productivity targets.
Pros
- Balanced motivation: Provides financial stability while still rewarding higher productivity.
- Encourages quality: Bonuses can be tied to both quantity and quality standards.
- Worker retention: May help attract and retain skilled workers looking for both security and performance rewards.
- Compliance friendly: Helps ensure workers earn at least the minimum hourly wage.
Cons
- Potential confusion: Workers may find bonus rules difficult to understand.
- Still higher costs: Growers may face higher overall wage bills if many workers qualify for bonuses.
- Difficult in low-yield seasons: Bonuses may be hard to fund if produce volumes are low.
- Complex administration: Requires careful record-keeping to track hours, overtime requirements and bonus eligibility.
Managing complexity with software
Each pay method has pros and cons for both growers and workers. The administrative burden is significant across all three pay methods. Many growers now turn to farm workforce management software to simplify this process. How does software help?
- Automated tracking: Records individual picking data and links it to worker hours.
- Built-in compliance checks: Alerts when piece rate earnings fall below minimum wage, so top-ups can be made automatically. Alerts to when overtime payments are required for workers paid hourly.
- Custom bonus rules: Applies consistent logic across all workers, reducing disputes and manual calculation errors.
- Real-time reporting: Allows supervisors to monitor productivity and quality in real-time.
- Integrated pay run export: Sends clean, verified data straight to payroll systems and labour hire contractors to reduce admin time and errors.
Software tools like ABCgrower can help growers maintain fairness, stay compliant with the Horticulture Award, and reduce time spent on paperwork — regardless of which pay method they choose.