Are output workers covered by The National Minimum Wage Act?

The National Minimum Wage Act 1998 applies to almost all workers and is not restricted to employees. The Act applies to output workers and contains specific requirements relating to them.

What is an output worker?

An output worker (commonly referred to as a “piece worker”) is someone who is paid by the number of items they produce or tasks they perform. They include people who are paid for each article of clothing they make and people who are paid for each envelope they fill.

What are the requirements as to output workers?

Under the Act output workers must be paid at least the amount of the National Minimum Wage for every hour they work or a “fair” piece rate for each piece they produce or for each task they perform. The work carried out by workers to whom the “fair” piece rate relates is referred to in the Act as “rated output work”.

What is “rated output work”?

Output work is “rated output work” under the Act if: 

• the output work relating to the type of piece in question or the type of task in question is work in respect of which the worker’s contract does not set any normal, minimum or maximum working hours; 
• the employer does not in practice determine or control the hours worked by the worker in relation to the subject piece or the subject task; and 
• the employer has determined the mean hourly output rate for the subject piece or the subject task; and 
• if it is work in respect of which the employer has given the worker a notice (see below).

The “fair” piece rate

Where output workers are paid a “fair” piece rate allowing the average worker to receive the minimum wage, that rate must be multiplied by 1.2 to ensure that output workers who are slightly slower than the average will receive the National Minimum Wage. 

How are “fair” piece rates calculated?

Where workers carry out “rated output work” the employer is required to determine the mean (average) hourly rate for a subject piece or a subject task by one of the following methods: 

By conducting a “satisfactory test” of the speed at which every worker in one of the groups produces the piece or performs the task, and by then dividing the total number of pieces or tasks, or working out the fraction of the pieces or tasks, that all of the workers in the group tested have produced or performed per hour during the test period by the number of workers in the group tested; or 

By making a “satisfactory estimate” of the average speed, in terms of pieces or tasks per hour, at which the workers producing the piece or performing the task are likely to produce that piece or perform that task. 

Once a satisfactory test has been carried out or a satisfactory estimate has been made, the employer is not required to conduct a further satisfactory test or make a further satisfactory estimate where there are subsequent changes in the number or identity of the workers unless the employer has reason to believe that the changes materially affect the mean hourly output rate. 

The employer is under a duty to keep such data as is necessary to show how he has determined the rate.

What is a “satisfactory test”?

A test is only satisfactory if all of the workers in the group are tested in working circumstances similar to those in which the worker is or will be producing the piece or performing the task. The permitted groups for the purposes of the test are all of the workers of the employer who produce the piece or perform the task or a sample of those workers of the employer which, in respect of the speed at which the workers in the sample work, is representative of all those workers.

What is a “satisfactory estimate”?

An estimate is satisfactory if: 

the employer has tested the average speed in terms of pieces or tasks per hour, at which a sample of workers of the employer working in similar working circumstances to the worker produce a piece or perform a task that is reasonably similar to the piece or task. In making the estimate the employer is required to fairly adjust that average speed to take into account the increased or decreased time involved in the production of the piece or performance of the task; or  

the employer has tested the average speed, in terms of pieces or tasks per hour, at which a sample of the workers of the employer working in different working circumstances from the worker produce the piece or perform the task. In making the estimate the has fairly adjusted that average speed to take into account the increased or decreased time involved in producing the piece or performing the task in the same working circumstances as the worker. 

In both cases the sample of workers tested must be, so far as is reasonably practicable, representative, in respect of the speed at which they work, of the speed at which the workers who produce the piece or perform the task work.

What time spent by a worker should be taken into account?

Any time spent by the worker in travelling for the purpose of doing output work should be treated as time spent doing the output work.  

Where the worker carries out the work at the employer’s premises or is required to report to such premises the time spent by the worker travelling between his home or any temporary residence and the employer’s premises should not be treated as time spent doing the output work.

How is it determined whether the national minimum wage has been paid?

The hourly rate paid to a worker in a pay reference period (a month or, in the case of a worker who is paid wages by reference to a period short than a month, that period) is determined as follows: 

Step one: by multiplying the amount the worker is paid per task or piece by the number of pieces completed or tasks performed during the pay reference period. 

Step two: divide by the hours the worker worked. 

If a particular worker works significantly slower than expected the amount may fall below the National Minimum Wage. However, provided that the piece rate is “fair” this is allowed.

Notices to be provided by employers of output workers

The employer of an output worker is required to give the output worker a notice before the start of the first pay reference period. The notice must be in writing and must: 

• explain that, for the purposes of complying with the National Minimum Wage Act 1998, that the employer will treat the worker as working for a certain period of time when producing pieces or performing tasks; 
• state that in order to calculate that period of time the employer has conducted a test or made an estimate to find the average speed at which their workers work when doing the same job as the output worker; 
• state what the “mean hourly output rate” (the number of pieces or tasks the average worker can complete in an hour) for the piece or task is; 
• state the rate or sum the worker will be paid for producing the piece or performing the task in question; 
• give the number of the Pay and Work Rights Helpline (0800 917 2368). 

If the notice does not contain all of this information the output worker will be entitled to the National Minimum Wage for every hour they work. 

If the terms of the notice change then a new notice should be provided by the employer before the start of the next pay reference period.