Incorporating PFD Allowances Into Piece Rates
By Trevor Sheffield
February 1, 2023
As the owner of a staffing agency, it’s critical to understand the legal regulations pertinent to paying your contracted employees. While these regulations can be confusing, they’re not impossible to learn about. When it comes to Personal Time, Fatigue, and Delay allowances, one common misconception is that they’re only necessary for employees with disabilities. This assumption is false.
What is personal time, fatigue, and delay?
It is impossible for employees to be working constantly at every moment of every day. This is automatically taken into account when a worker is hired for an hourly or salaried position, but not for contractor positions or for working options that are paid by piece. Personal Time, Fatigue, and Delay (PF&D) allowances are required to be incorporated into payments calculated by piece. This particularly affects staffing agencies, since they contract with individuals to fill positions within companies—often by project. According to the Department of Labor, “The Wage and Hour Division will not accept a PF&D allowance that is less than 9 minutes per hour. A PF&D allowance is required only when establishing piece rates.” While PF&D allowances are often put into place to account for employees with disabilities, these regulations are often necessary for all employees.
Why it matters
If you own and operate a staffing agency, chances are you’ll need to incorporate PF&D allowances into the negotiated pay rates with your contractors. Compliance with this federal regulation is necessary in order to keep your business running. Additionally, PF&D allowances are important because your employees are all human. Everyone needs breaks and leeway time for unavoidable fatigue and delay. Calculating appropriate PF&D rates helps your employees succeed at what they do without the fear of falling behind. It also shows you trust your workers to accomplish their jobs and duties without an overly heavy-handed approach. As you build trust within your staffing agency, these federal guidelines will be immensely helpful and allow your employees to feel valued at every level.
How to calculate appropriate PFD allowances
How does one do so? The Department of Labor offers several suggestions on how to calculate an appropriate PF&D allowance for contractors and employees paid by piece. Each of these calculations involves timing and observing able-bodied workers, so be prepared for this task. Additionally, remember that the Wage and Hour Division does not accept PF&D allowances under 9 minutes per hour.
The first way to calculate the appropriate allowances is by seeing how many units can be created by an able-bodied worker in 25 minutes and then multiplying that number by two. This estimates the standard number of units that can be finished in one hour when given 10 minutes of PF&D allowance.
The second way is to use the above timing method to calculate the average amount of time it takes for an employee to complete a single unit. Then, take the number of minutes and/or seconds and multiply it by 1.2. Doing so will factor in appropriate PF&D allowances.
Lastly, an employer can calculate the number of units an able-bodied employee creates on average in 60 minutes and then determine what 85% of that total would be. This automatically implies a 9 minute PF&D for every hour worked.
How do you incorporate PF&D allowances into your pay-by-piece contracts? Is this something you’ve considered before? As the owner of a staffing agency, ensuring you comply with these federal regulations is a necessity. When you conduct your studies, consider using Timerack’s time tracking software to ensure your data is fully correct.