What does "piece-rate" refer to in compensation?

"Piece-rate" compensation refers to a specified rate that is paid per unit produced or sold. This method of payment incentivizes workers to increase their productivity, as their earnings are directly linked to the amount of work they complete or the number of products they successfully sell. For example, in a factory setting, an employee might earn a certain amount for each item they assemble, motivating them to work efficiently to maximize their income.

In contrast, the other options represent different forms of compensation. A fixed monthly salary offers a stable income regardless of output, which does not encourage increased production. A bonus for exceptional performance rewards individuals for surpassing set performance benchmarks but does not offer a direct per-unit incentive. Lastly, a percentage of sales revenue compensates individuals based on overall sales rather than individual output, making it less specific than piece-rate compensation, which focuses strictly on the quantity of individual contributions.