The National Minimum Wage Regulations 1999 (Amendment) Regulations 2004

Explanatory Note

(This note is not part of the Regulations)

The Regulations amend the National Minimum Wage Regulations 1999 (“the principal regulations”). The majority of the provisions come into force on 1st October 2004, the remainder on 6th April 2005.

The Regulations replace existing provisions relating to output workers (those paid not for the time that they work, but for the piece produced or task performed). The Regulations replace the system of “fair estimate” agreements, under which employers set a fair estimate of the hours needed to complete a block of work and then pay the worker the hourly rate of the national minimum wage for the hours actually worked up to the limit set in the estimate, with a new system called “rated output work”.

Under the new system, the employer must give his workers a notice containing specified information and must test his workers to determine “the mean hourly output rate” ie. the average number of pieces of the same type produced or tasks of the same type performed in an hour by his workers. The Regulations provide for the mean hourly output rate to be estimated in certain circumstances. For the purposes of the Regulations, the number of hours taken by a worker in producing the relevant pieces or performing the relevant tasks during a pay reference period (which is defined in regulation 10 of the principal regulations) is deemed to be the same number of hours that a worker working at the mean hourly output rate would have taken to produce the same number of pieces or perform the same number of tasks during the pay reference period. The employer must pay his workers producing that piece or performing that task an amount per piece or task which, given that his workers are deemed to have worked at the mean hourly output rate, is at least equivalent to the hourly rate of the national minimum wage.

The Regulations further provide that, with effect from 6th April 2005, the number of hours taken by a worker in producing pieces or performing tasks during the pay reference period will be treated as being 120 per cent of the number of hours that a worker working at the mean hourly output rate would have taken to produce or perform the same number of the same type of pieces or tasks.

The Regulations contain transitional provisions.

A Regulatory Impact Assessment of the estimated costs and benefits to businesses of these Regulations has been placed in the Libraries of both Houses of Parliament. Copies are available to the public from The Employment Relations Directorate, Department of Trade and Industry, 1 Victoria Street, London SW1H 0ET and on the DTI website at www.dti.gov.uk.