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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
, see all updates

Types of work: output work

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, regulations 36 to 43
* before 6 April 2015; National Minimum Wage Regulations 1999, regulations 5, 17, 25 & 26

Employers are allowed to pay workers according to the number of items they produce (this is sometimes known as ‘piece rate’). However the national minimum wage is an hourly rate and not a piece rate. Therefore, the rate for the number of pieces produced needs to be linked to the national minimum wage rate and the employer has to identify the number of hours worked where the national minimum wage rate would be payable.

The employer can either:

  1. Agree a ‘fair’ piece rate (NMWM03130) using the rated output work system (NMWM07080) (this replaced the fair estimate agreements (NMWM07090) from 1 October 2004) - in which case the worker is performing output work. or
  2. Pay at least the national minimum wage for every hour worked. However, if the worker is required to perform their work at times specified by the employer then they will be performing time work - this can be the case even though the worker is still paid mainly by the ‘piece’ or ‘task’ (NMWM07040).

Output work is defined in the regulations as not time work (NMWM07040) and is paid for by reference to;

  • the number of pieces made or processed; or
  • some other measure of output such as the number of, or value of, sales made or transactions completed.

This is commonly known as ‘piecework’ or ‘commission work’

An example of output work would be where a finance company employs telesales staff on a commission only basis. They work from home under the rated output work system and the company does not set any hours of work. The worker is free to start and finish whenever he/she wishes and is paid for each new customer won.

Output work would not include piecework or commission work where the worker does a set number of hours even if the worker is paid according to the number of items produced. If the employer fixes the hours of work then this would be treated as time work (NMWM07040).

Arrangements which typically involve output workers are:

  • Pieceworkers (when the workers do not work set hours and are paid under the rated output work system)
  • Some agricultural work (NMWM06020)
  • Commission work (door to door working, travelling sales personnel)
  • Home work (where the workers are paid wholly according to successful transactions).