With the traditional 9-5 employer and employee relationship evolving year on year, it’s no surprise that the way you pay your staff will also change.

Piece work is one such an example, which is a type of employment where employees receive pay for a task completed.

This guide takes a closer look at what it means and whether it’s a good fit for your business.

What’s piece work?

A definition here is it’s work that pays according to the number of items that an employee makes—or the tasks they perform.

For example, piece workers can include those who make articles of clothing and receive pay for every piece of clothing they produce.

In that situation, work from home piece work is usually the approach to take for employees. And they’re free to start and finish work whenever they like. This type of work is also referred to as “output work”.

Understanding piece rate pay

Piece work laws in Britain outline the importance of this employment type and the expected pay. All piece workers must either receive the national minimum wage or a fair piece rate.

Calculate piece work pay by evaluating the average number of pieces or tasks that pieceworkers who are doing that work produce or perform per hour.

But, again, do remember that it’s common for employees to complete this work from their house. So, if they ask, piece rate work from home is as explained below. But you can find more advice about this via Acas’ piece work feature.

Piece rate pay examples

You must take into account an overall average rate and not just the output of the fastest worker.

The current minimum wage is then divided by this number and multiplied by 1.2 in order to identify a fair rate for each piece completed.

The below outlines a piece rate and time rate example:

There are five workers in the group. Three of them produce 30 hats in an hour, one of them produces 20 and the other 25.

To work out the time rate and piece rate, the employer should add these figures together and divide by the total amount of time taken, 5 hours, which comes to 27.

They should then take the current hourly national minimum wage (from April 2019 it’s £8.21). Divide that by 27 and multiply the answer by 1.2.

In that scenario, you should provide approximately 36.488p per unit as their piece work rate.

Piece work pay laws don’t require you to round up to the nearest penny per unit. But you shouldn’t round down as part of piece rate wages.

The calculation should be rerun regularly, particularly in situations where there is a change to the work that needs doing to make the piece or perform the task.

Establishing an agreement

National minimum wage regulations outline that there has to be a written and signed piece work agreement. This should outline the following:

  • You’ll treat workers as working for a certain period of time when doing the job of producing pieces or performing tasks.
  • To calculate that time rate, 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.
  • What the time rate, or mean hourly output rate is (as worked out above).
  • The rate or sum workers will receive for producing the piece or performing the task.
  • The telephone number of the Acas Helpline.

It can also establish whether the role will be piece work from home or not.

Issue your agreement before the start of the first pay reference period. If you fail to do so, you’ll have to pay staff in line with the national minimum wage.

Need our help?

Do you need help with understanding how much pay to offer your staff? We offer 24/7 advice to SMEs—call us today on: 0800 028 2420.