A payment plan where earnings are based on units produced is called what?

A payment plan where earnings are based on units produced is referred to as the piece rate plan. Under this type of compensation system, employees earn a specific amount of money for each unit of product they complete or task they perform, directly linking their productivity to their pay. This method incentivizes workers to increase their output, as their earnings increase with their productivity.

In contrast, other pay structures such as hourly wage plans and base salary plans provide fixed compensation regardless of the volume of work completed. A commission plan typically applies to sales positions, where employees earn a percentage of the sales they generate rather than being directly paid based on the number of units produced. Therefore, the piece rate plan specifically aligns with the scenario described in the question, emphasizing a direct correlation between the quantity of work done and the earnings received.