What is product pay? How to calculate salary by product

What is product pay?

To put it simply, businesses apply product-based wages to employees based on the quantity of quality products. To pay by product, businesses need to list the products produced in a certain period of time and determine a specific unit price for each product.

Based on the product-based salary system, employees can receive a salary corresponding to the number of products they produce. If a worker produces more products with a higher unit price, the higher the wage will be. Normally, businesses will pay employees by product on a monthly basis.

Forms of payment by product

Thanks to this product-based salary regulation, employees can understand the amount of work they need to do as well as ensure their rights. Enterprises can classify the forms of salary payment by product as follows:

• The salary is calculated by product directly on the individual: The actual salary received will be determined based on the number of products produced and the unit price per product for each individual individual. This form of salary calculation, although the enterprise helps to promote the work performance of the employees, makes the employees only focus on pursuing personal interests.
• Salary is calculated according to the product of the whole team: The salary will be calculated based on all the products of a team of many people contributing to perfection. The collective product-based salary calculation method can help businesses easily manage employee salaries. However, the downside is that there will be a situation where the workload is divided unevenly.
• ​Indirect product wages This is a form of wage calculation for employees that does not directly interfere with the finished product. The salary will completely depend on the production results of the main worker.
• Salary is calculated by product with bonus: The salary by product with bonus is determined based on the number of finished products and in addition the bonus amount for exceeding the target or achieving very good quality. As a result, individual employees will be more motivated to work and promote their potential.

How to calculate salary by product

In businesses, the human resources department is the place that holds all the responsibility for how to calculate salary for employees. For each form of product-based salary, there will be a separate salary calculation formula as follows:

• Calculating individual product wages: Product salary = Total number of products produced x unit price of product.

• How to calculate salary by product of the whole team: Product salary = Total quantity of finished products x unit price of products.
• Indirect product salary calculation: Product salary = Unit price of service products * total number of products produced by main employees.
• Calculating salary by product with bonus: Product salary = Product salary + [(% of product bonus for 1% overproduction * percentage of excess completion)/100 * salary Products]

Besides, to automate the payroll process, businesses can apply the free payroll software. With this software, the human resources department can easily set up the rules for calculating salary for each product between individuals, groups and bonus,...

Regulations on the form of payment by product

With regard to product-based pay, enterprises need to ensure compliance with the following regulations to ensure the interests of employees and employees:

• Considering the case of employees working overtime outside the main working time, the purpose is to increase the number of products exceeding the target. Item wages will be calculated based on gross product pay and overtime pay.
• In case the employee is paid by product, the night-time wage is calculated as follows: Product salary = Product unit price of normal working day + Product unit price of normal working day x The level is at least 30% x Number of hours worked by employees at night.
• Based on Article 97 of the Labor Code 2019, the salary payment period for employees receiving wages by product, according to which “Employees who receive salary by product or by package shall be paid according to the agreement of the employer. Both parties, if the work has to be done for many months, the monthly salary will be advanced according to the volume of work done in the month.”

The use of this form of salary calculation helps employees to calculate their own salary based on the number of products achieved. Hopefully, the above information will help readers understand how to calculate salary by product.