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Wednesday, 3 October 2023

Calculating the National Minimum Wage: output work (piece work)

Almost all workers should be paid the National Minimum Wage, including output workers (often called 'piece workers'). If you are paid for the number of things you make or tasks you do then you are probably an output worker.

Output work

Output workers, also called ‘piece workers’, are paid for the number of things they make (for example, articles of clothing) or tasks they do (for example, filling envelopes).

Output workers often work at home and are free to start and finish work when they like. If you do piece work during hours fixed by your employer you are doing time work, not output work.

Pay and Work Rights Helpline

For confidential help and advice on the NMW call 0800 917 2368

If you are an output worker your employer must choose between paying you either:

  • the National Minimum Wage (NMW) for every hour you work
  • a ‘fair’ piece rate for each piece produced or task performed

‘Fair’ piece rates

There are special rules for working out a ‘fair’ piece rate. Your employer must find out how many pieces or tasks an average worker can complete in an hour. The ‘fair’ piece rate is 1.2 times the rate which lets a worker of average speed earn the NMW in an hour. This gives workers whose speed may be a bit below average (eg because they just started) the chance to earn the NMW anyway.

Your employer must give you a written notice before the start of your first pay reference period. If the terms of the notice change then a new notice should be provided to you before the start of the next pay reference period. The notice must explain how they have worked out the ‘fair’ piece rate and must:

  • explain that, for the purposes of complying with NMW laws, your employer will treat you as working for a certain period of time when doing your job of producing pieces or performing tasks
  • state that in order to calculate that period of time your employer has conducted a test or made an estimate to find the average speed at which their workers work when doing the same job as you
  • state what the ‘mean hourly output rate’ for the piece or task is (the ‘mean hourly output rate’ is the number of pieces or tasks the average worker can complete in an hour)
  • state the rate or sum you will be paid for producing the piece or performing the task in question
  • give the number of the Pay and Work Rights Helpline: 0800 917 2368

If the notice doesn’t contain all of this information you will be entitled to the NMW for every hour you work, so you may want to keep a record of the hours you have worked.

Hours that count towards NMW pay

Output workers have to be paid at least the NMW for time spent travelling in connection with the job, eg if you make things at home but have to take them to your employer’s premises. However, if you make things at your employer’s premises, you aren’t entitled to the NMW for the time you spend travelling there from home.

Calculating whether you are paid the NMW

If you are an output worker, to calculate whether you have been paid the NMW you should:

Step one: multiply the amount you are paid per task or piece by the number you have finished in the pay reference period

Step two: divide by the hours you worked

Example calculation of output work

You are a 20 year old worker, paid weekly (so your pay reference period is one week). You receive £2 for each widget you produce. In a particular week you worked 30 hours and produced 60 widgets.

Step one: multiply your pay per piece by the number of pieces you completed (£2 x 60 items = £120)

Step two: divide your pay by the number of hours you worked (£120 / 30 hours = £4 per hour)

This is below the NMW rate of £4.98 for a 20 year old.

However, you might be paid this because you work significantly slower than expected. Your employer has to set the 'fair' piece rate so that even workers whose work rate is a bit below average will be able to earn the NMW. If you believe your work rate is near the average, you should take this up with your employer.

Where to get help

The Pay and Work Rights Helpline gives confidential help and advice on the NMW in over 100 languages. If you aren’t being paid the NMW you can contact the Pay and Work Rights Helpline or use the online enquiry or complaint form.

Additional links

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