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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
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National minimum wage rates: testing to find the average hourly output rate

Relevant legislation

The legislation that applies to this page is as follows:

For pay reference periods commencing

* on or after 6 April 2015; National Minimum Wage Regulations 2015, regulation 42(3)
* before 6 April 2015; National Minimum Wage Regulations 1999, regulations 26A(1A)(2) & (4)

An employer can carry out a test to establish the average hourly output rate (NMWM03150) for rated output workers producing a particular piece or doing a particular task. All the workers tested must:

  • be producing the same piece or doing the same task as the worker, and
  • be working in similar circumstances to those in which the worker is (or will be) working.

For that particular piece or task an employer can either carry out a test of:

  • all his workers or,
  • a sample of his workers. (The sample must be representative in terms of the numbers of workers chosen and the speed at which they work. For example, a reasonable proportion of workers doing the same job might be 10%. The employer must be able to justify his choice. If the employer cannot, then ultimately only the courts can decide and in those circumstances the burden of proof would fall on the employer).

Employers are expected to retest from time to time to take account of any relevant changes. However, the employer is not obliged to retest simply because the number or identity of workers changes over time unless he has reason to believe that the changes significantly affect the average hourly output rate.

It is for employers to judge when pieces or tasks are the same, when the circumstances are similar and what is a fair test. However, ultimately only the courts can decide and the burden of proof would fall on the employer. Employers must be able to justify their decisions and must retain sufficient documentation to validate their results.

In certain circumstances, the average hourly output rate can be estimated (NMWM03170) but to make an estimate, tests must have been performed first on like or similar items or tasks.

Calculating the average hourly output rate

To find the average hourly output rate the employer divides the total number of pieces produced or tasks performed per hour during the test, by the total number of workers tested. The result should be rounded to the nearest two decimal places.

For example, an employer tests all his 15 workers and:

5 produce 12 items an hour = 60 items

10 produce 10 items an hour = 100 items

In total, 160 items are produced during the hour by the 15 workers.

The average hourly output rate is, 160 divided by 15 = 10.67 items (rounded up) per hour.