Paid per task or piece of work done
Workers paid per task they perform or piece of work they do (known as piece work) are classed as doing ‘output work’. They must be paid either at least the minimum wage for every hour worked or on the basis of a ‘fair rate’ for each task or piece of work they do.
Output work can usually only be used in limited situations when the employer doesn’t know which hours the worker does (such as with some home workers). If an employer sets the working hours and the workers have to clock in and out, this counts as time work, not as output work.
The fair rate is the amount that allows an average worker to be paid the minimum wage per hour if they work at an average rate.
There is a way to work out the fair rate per piece of work done which employers must follow.
Work out the fair rate
Find out the average rate of work per hour (tasks or pieces completed).
Divide it by 1.2 (this means new workers won’t be disadvantaged if they’re not as fast as the others yet).
Divide the hourly minimum wage rate by that number to work out the fair rate for each piece of work completed.
Work out the average rate of work per hour
To work out the rate to pay workers, employers must carry out a fair test to see what the average rate of work is.
Test some or all of the workers. The group you test must be typical of the whole workforce - not just the most efficient or fastest ones.
Work out how many pieces of work have been completed in a normal, average working hour.
Divide this by the number of workers to work out the average rate.
If the work changes significantly, do another test to work out the new average rate. It’s not necessary to do another test if the same work is being done in a different environment, for example work previously done in a factory being done at home.
Workers are paid for each shirt they make. They can produce on average 12 shirts per hour. This number is divided by 1.2 to make 10.
Andy is 25 and is eligible for the living wage rate of £7.83.
This means he must be paid at least 79p per shirt he makes (£7.83 divided by 10).
Step 1 Check your business is ready to employ staff
Step 2 Recruit someone
You need to advertise the role and interview candidates. You can use a recruitment agency to do this or do it yourself.
As an employer you must make sure you recruit employees fairly.
and Check they have the legal right to work in the UK
and Find out if they need a DBS check
Step 3 Check if they need to be put into a workplace pension
You have ongoing responsibilities to check if your employees need to be put into a workplace pension scheme.
Step 4 Agree a contract and salary
When someone accepts a job offer they have a contract with you as their employer.
Step 5 Tell HMRC about your new employee
You must tell HMRC about your new employee on or before their first pay day.