When does it make sense to offer a worker a piece-rate contract? What

When does it make sense to offer a worker a piece-rate contract?

What will be an ideal response?

ANSWER

Piece-rate contracts require that a worker’s output can be measured, that the right behavior is elicited, and that workers can be persuaded to accept the contract. Workers like teachers or managers, whose output is difficult to measure, are not good candidates for piece rates. When quality is more important than quantity, such as with medical care, piece-rate contracts are not good. In terms of eliciting the right behavior, workers who are poorly monitored can overstate the work done or needed. Finally, workers may not accept the contract out of fear that their incomes may eventually fall.