Piecework vs hourly bidding

When it comes to comparing piecework and hourly rates, there is often a misconception that piecework companies always fare better than hourly bidding companies. This is only true if the piecework rate is equivalent to the hourly rates of their competitors. At this moment, companies that pay higher rates for piecework when bidding against hourly rates may be doing themselves a disservice, because in commercial competition, the lowest bidder usually wins the job. Of course, if the bidding is pieceworker against pieceworker, then this may not be an issue.

In my many conversations with estimators and company owners across North America, I have come across some piecework rates that are wildly out of sync with hourly rates of competitors who bid on an hourly basis. For example, while the average hourly rate for a drywaller in a certain location may be $30, the piecework rate for a 4×10 sheet may be $16. To be on equal footing, the hourly bidder would need to bid at $60 per hour or the piecework company would have to bid at $8 per sheet.

Now, I realize that hourly rates and piecework rates around North America, vary but the idea and the math still hold true.

As a result, piecework companies may be losing out on bids and making less money than hourly shops because their win ratio when bidding against hourly bidders is less.  As hourly rates stand today, it is unlikely that a piecework company can beat a group of hourly bidders because they are trying to pay their pieceworkers the amount they are asking for. The asking price of pieceworkers per sheet is not sustainable for piecework vs hourly bidding in today’s market, simply because (and do I dare say), non-union hourly rates are too low in comparison.

Companies need to find a balance between paying their workers fairly and being competitive in the market… a tough thing to do when we are experiencing such piecework vs hourly discrepancies.

Raise the bridge or lower the water?

I can almost tell with certainty that hourly rate shops have been raising rates very slowly through the years, yet the piecework rates have been increasing steadily through the years.

Why?

Because it’s usually the company that decides on the hourly rates that they will pay… but it’s the drywall pieceworker that decides on the price per piece that they desire.

So when I am asked, “Harry, why did I do better years ago when bidding with piecework prices?” I usually say that it’s due to the discrepancy in price between today’s hourly and piecework bidding. When hourly bidding was at $28 per hour vs $7 per sheet, the bidding was much tighter.

How do we get these two types of rates in sync?

The only solution can be to get everyone on the same page, right?

Educate!