Calculating the hours worked for minimum wage
Here is the method of calculating the number of hours worked to check compliance for national minimum wage regulations. The exact method depends on the type of worker under consideration.
If an employee is paid according to the number of hours they work, they are doing ‘time work’. For time workers, the hours will be those actually worked during the Pay Reference Period (PRP) for the minimum wage. The PRP is usually the period of time for which a worker’s wage is paid. For example, if they are paid monthly, the PRP will be a month, if they are paid weekly, the PRP will be a week and if they are paid daily, the PRP will be a day.
Output work is where workers are paid for the number of things made or tasks undertaken (also known as ‘piece work’). For output workers there are two approved methods of calculating hours worked:
- The employer keeps a record of the hours worked. If the employer fails to do so, then the worker's own records will suffice. (This is the default method.)
- The worker and employer make a written agreement estimating the number of hours likely to be worked during a full working week:
- The estimate must be fair and reasonably reflect the amount of output work to be done
- The worker must be entitled to a payment of an agreed piece rate or commission rate equal to the national minimum wage for the ascertained hours
- The worker must keep a record of their own hours and give a copy to the employer to keep in his or her records
- If there is no such agreement, and no employer records, then the employee's records will be used to calculate compliance with the national minimum wage provisions
Non-hours workers (Unmeasured Work)
Unmeasured work is any work that isn’t time work, salaried hours or output work. There are no set times to undertake tasks and/or work is carried out as and when required. There are two methods for calculating the working hours of non-hours workers:
- The employer keeps a record of the hours worked, checking these against the national minimum wage requirements. If the employer keeps no records, then the employee's records will suffice. (This is the default method.)
- The employer and employee have a written agreement setting out the average number of hours in a working day. The estimated hours must be realistic and the rate per hour must meet the national minimum wage requirements.
The hours worked will be calculated according to the number of hours set out in a worker's contract on the first day of the Pay Reference Period. Detailed provisions apply to calculating those hours over and above those provided for in the worker's contract.
Calculating the minimum wage
The Directgov website provides detailed guidance on how to calculate the National Minimum Wage, depending on whether the work being undertaken is time work, output work, unmeasured work or salaried work.
Reviewed and updated by the HR Services Partnership - April 2010.
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