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The Latest Tips For Partners on How To Extend Your Workforce Management Solutions

How a Piece Rate Payroll Solution Beats Out the Competition Every Time

Posted by Kit Dickinson on Mar 13, 2022 11:00:00 AM
Kit Dickinson
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Female production worker in a manufacturing plant | IDI piece rate calculations

If you’ve been competing on price to stand out from other payroll solutions, IDI opens up a whole new advantage over your competition.

Often, manufacturers use a pay model called production pay, or piece rate. Production pay is an incentive system that raises an employee’s hourly pay based on their productivity. If a worker hits certain production quotas, they earn one-time bonuses. Every time they reach the next tier of productivity, they earn an additional amount per hour for that day.

Productivity is tracked in a software application called a production system, a platform specifically designed for the manufacturing industry. These applications are used to record employee productivity as well as profitability. From a production standpoint, you want to know how many quality parts are being produced, so you can gauge how profitable your product will be.

So far, so good. The problem comes with payroll.

Piece Rates Mean Payroll Problems

Different pieces tend to have different rates of pay — usually due to the difficulty or time involved in assembling them. And because production pay is a one-time bonus, it resets every shift. Once all the dust settles, a single employee could easily earn eight to ten different types of wages in a single week.

To make matters even more complex, the company might be unionized. That means that union workers aren’t just earning multiple pay rates, they’re also earning certain benefits for hitting production quotas as well.

Multiply those variables by the number of production workers in the company — who are all being paid different rates from one another — and the complexity can be mind boggling.

From a purely production standpoint, these production systems are impressive software platforms that perform incredibly well. However, they aren’t designed to send production information to payroll. That mind-boggling data has to be handled manually every pay period.

It’s not an exaggeration to say that payroll managers dread this part of their work. It’s time consuming, costly from an operations perspective, prone to human error, and a liability for employee litigation.

Your competition isn’t doing anything about it, but you can.

Related: Your Playbook to Close More Deals in the Manufacturing Industry

Automate Painful Payroll Calculations

Production systems don’t do a good job with payroll, and payroll systems aren’t designed to connect with production systems. But IDI’s integration solution bridges the gap. Our software completely automates the payroll calculations that your customers have been doing manually for years.

When IDI’s system is run at the end of the pay period, it accesses a data file, interprets the employee-specific production data, and runs all of the complex payroll calculations associated with piece rates (as well as other payroll calculations).

Results are passed to your payroll system for processing. Calculations are accurate every time, and the entire process takes just seconds. IDI’s integration solution can free up dozens of hours every pay period and hundreds of hours every year.

Download: A Solution Guide for Manufacturing Companies

The Selling Advantage of an IDI Partnership

Most payroll companies don’t provide the solution that IDI offers. To make a sale, they have to skirt around the gaps in their offerings — which leaves the burden of piece rate calculations on the payroll manager’s shoulders.

As an IDI partner, you have a clear advantage over the competition that grabs your customers’ immediate attention. You can present a comprehensive solution that others don’t provide.

As you’re beginning to discover your prospects’ payroll needs, dig deeper to learn about their incentive pay structures. Ask the following questions.

Do you have any incentive pay policies to reward and retain your top performers?

Ask about their current and past experience working with time-and-attendance systems. While many of these applications can assign rates based on one or two variables, companies that use a piece rate pay model have countless variables to deal with.

Chances are, your prospect has been frustrated by the severe limitations of your competitors’ systems for years.

Do you pay employees different rates based on work performed?

Another piece of the production pay puzzle is the fact that your prospect may use multiple variables beyond production rates to determine pay — for example, unions, departments, job roles, and work orders.

Your competitors may be able to manage one or two variables, but often that’s much too few to be helpful. IDI’s solution has your bases covered.

How are you managing compliance with FLSA based on your unique time AND production pay policies?

FLSA overtime requires factoring in different rates of pay and other earnings. This makes the manufacturing industry one of the most complex sectors for calculating weekly average overtime rates. If your prospects are managing their incentives and other rates manually, they’re also calculating FLSA manually. That’s a risky exercise, because a manual calculation error can set them up for significant compliance violations and government fines.

With IDI’s integration solution, you can relieve these pain points, and offer a positive financial impact on P&L:

  • Introduce cost savings by avoiding government fines for wage and hour violations and union grievances
  • Save time and operational costs with automated, accurate calculation of employee job and incentive rates
  • Retain talent by maintaining (and automating) incentive policies that reward top performers

As an IDI partner, you can help your customers automate their production pay and union calculations — something that other payroll companies don’t offer. This simple promise can be a game-changing difference maker for your customers, and a deal closer for you.

Check out our solutions for the manufacturing industry →

Topics: Manufacturing Industry Solutions

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