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Minimum Wage Rates for Work Types UK

Employers use an hourly rate to calculate the correct National Minimum Wage for their employees. Even so, not all workers get paid by the hour in the United Kingdom.

Thus, it is important to understand how minimum wage rates apply to different types of paid employment, such as time work, output work, and salaried hours work.

As a result, you need to know how to work out the equivalent hourly rate - no matter how your workers get paid.

So, how do you check your workers are getting the correct minimum wage? It will depend on how you pay them, such as:

Note: You can use the National Minimum Wage and Living Wage calculator to check if your workers are getting payments above the minimum wage.

What is Counted as Working Time?

If you are working out what counts as working time for all types of work, you should include any time spent:

However, you should not include any time spent:

Note: The Acas helpline provides free and confidential advice to employers and employees about employment rights in the United Kingdom.

Time Work (paid by the hour)

In short, doing 'time work' means you get paid according to the number of hours you work. Even so, the average hourly pay needs to be the National Minimum Wage (or higher) and worked out over the period that each pay packet covers (e.g. one month).

An Example:

Suppose you are working in a call centre and you get paid at the end of each month for the number of hours you worked (e.g. 124 hours).

The calculation for a worker paid by the hour would be the current minimum wage rate multiplied by the number of hours worked (e.g. 124).

Salaried Hours (paid an annual salary)

Workers will be carrying out a type of employment classed as 'salaried hours' if the way that they get paid is:

The contract may not state the basic number of hours as an annual figure for salaried hours workers. But, the employer and worker would both need to be able to calculate it to ensure the pay rate is at least the minimum wage.

Working Out Hourly Rates

Follow these three basic steps to work out your worker's hourly rate:

  1. Determine the basic annual hours as stated in the contract.
  2. Divide the number of basic annual hours by the number of times they get paid each year (often 12 when paid monthly) to determine the average number of hours covered by each pay packet.
  3. Divide the amount showing in each pay packet by the average hours to work out the worker's hourly rate.

Note: The employer would also need to pay at least the minimum wage for any extra hours worked on top of the number of hours as stated in the worker's contract.

Output Work (paid per task)

Some workers get paid for each task they perform or for each piece of work they do. They must receive (either):

As a rule, employers can only use output work in limited situations. An example would be when the employer is not aware of the actual hours the worker does (e.g. a home worker).

Note: Setting the working hours whereby the worker needs to clock in and out would count as 'time work' (not output work).

What Counts as the Fair Rate?

In short, it refers to the amount that allows an average worker, working at an average rate, to receive pay at the minimum wage per hour.

Employers should follow these three steps when working out the fair rate for a worker on piece work:

  1. Determine the average rate of work per hour (e.g. for the number of tasks or pieces completed).
  2. Divide it by 1.2 (doing so will not disadvantage new workers who are not yet as fast as others).
  3. To calculate the fair rate for each piece of work completed, divide the hourly minimum wage rate by the number you determined.

Employers should follow these four steps when working out the average rate of work per hour (e.g. carrying out a fair test to determine the average rate of work):

  1. Test some of the workers (or all of them). The group tested must be a typical representation of the whole workforce (i.e. not only the fastest or most efficient).
  2. Determine how many pieces of work they complete in an 'average' working hour.
  3. Divide the result by the number of workers to calculate the average rate.
  4. Carry out another test to calculate the new average rate if there is a significant change in the type of work performed.

Note: There would be no need to carry out another test for the same work done in a different environment (or work done at home that was previously done in a factory).

Unmeasured Work (paid another way)

The term 'unmeasured work' covers the minimum wage rates for different types of employment not covered by the usual types of work.

In most cases, it refers to a set amount of pay for doing a particular task no matter how long it takes (such as getting paid £300 to lay a patio).

When working out the minimum wage for unmeasured work, you can either:

Making a Daily Average Agreement of Hours

As a rule, the employer and worker would need to agree a typical number of hours worked each day. You can use one agreement to cover several pay reference periods (e.g. weeks if paid weekly) providing the average number of hours stays the same.

Daily average agreements of hours must be stated in writing, made prior to the start of the pay reference period that they cover, and state the number of hours (as an average and realistic) that the work should take each day.

Minimum Wage Rates for Different Types of Work in United Kingdom