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Relevant legislation

The legislation that applies to this page is as follows:

• National Minimum Wage Regulations 2015, regulations 41 to 43

For pay reference periods starting on or after 1 October 2004, special rules apply to the rated output work system (NMWM07080). Under that system, employers can decide to pay a "fair" piece rate for every piece produced or task performed (rather than pay at least National Minimum Wage for every hour worked) (NMWM03150).

“Fair� piece rates (NMWM03130) are calculated with reference to:

• the average hourly output rate of an average worker (NMWM03150), and
• the worker's assessed hourly rate (NMWM03130) and
• the worker's National Minimum Wage rate (NMWM03010).

Calculating a “fair� piece rate

To calculate a “fair� piece rate divide the worker’s National Minimum Wage hourly rate by the average hourly output rate for the piece or task.

If the pay reference period starts on or after 6 April 2005, multiply the result by 1.2. (This produces a result that is the equivalent of calculating by reference to the worker’s assessed hourly rate (i.e. 120% of the average hourly output rate.)

"Fair" piece rates must be re-calculated whenever National Minimum Wage rates change.

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Examples

Pay Reference Periods starting 1 October 2004 until 5 April 2005 (inclusive)

The worker is entitled to National Minimum Wage at the main rate (then £4.85)

• The employer tells you the average hourly output rate = 10 items per hour
• The “fairâ€� piece rate is £4.85 divided by 10 = £0.485 per item

Pay Reference Periods starting on or after 6 April 2005Ìý

The worker is entitled to National Minimum Wage at the main rate (here £5.05)

• The employer tells you the average hourly output rate = 10 items per hour
• The “fairâ€� piece rate is £5.05 divided by 10 multiplied by 1.2 = £0.606 per item

Although not specifically shown in the calculation above, the assessed hourly rate in this example is 8.33 items, (120% of the average hourly output rate, 10 divided by 1.2)