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HMRC internal manual

National Minimum Wage Manual

Types of work: output work: rated output work (from 1 October 2004)

Relevant legislation

The legislation that applies to this page is as follows:

  • National Minimum Wage Regulations 2015, regulation 41

 

For pay reference periods starting on or after 1 October 2004 output work is classed as rated output work for any pay reference period when:

  • the worker’s contract does not set any normal, minimum or maximum working hours to do the work, and
  • the employer does not determine or control the hours worked by the worker and
  • the employer has established a mean hourly output rate for the piece produced or task performed, and
  • the worker has been given a notice (NMWM07070) which satisfies the requirements of the regulations.

Rated output workers are paid wholly by reference to the number of pieces made or tasks performed. They are not paid an hourly rate. However, they are still entitled to be paid the national minimum wage, which is expressed as an hourly rate. The rated output work system links the output of a worker to the minimum wage by means of the mean hourly output rate (NMWM03150). This is used to determine a “fair” piece rate (NMWM03130) for each piece produced or task performed. If the employer is actually paying at least the “fair” piece rate for each item then the worker is receiving the national minimum wage.

Prior to the 1 October 2004, the “fair estimate agreement” system was used to determine if an output worker was receiving the national minimum wage (NMWM07090).