As a homeworker, am I entitled to the minimum wage?

All homeworkers must get at least the national minimum wage (NMW) rate for each hour that they work. If your employer says that you are not entitled to the NMW because you are ‘self-employed’, it is up to them to prove why you are not an employee or a worker. Even if you are classified as self-employed for tax and National Insurance purposes, you may still be entitled to the NMW. If in doubt, seek advice.

As of 1 October 2008, the adult rate for workers aged 22 and over is £5.73 per hour. The development rate for 18-21 year olds and for workers receiving accredited training in the first 6 months of a new job is £4.77 per hour. A new rate for 16-17 year olds, started in October 2004 at £3.53 an hour.

Hourly pay for the NMW is worked out as an average over your ‘pay period’. If you are paid weekly, your pay period is a week. If you are paid daily, then the pay period is a day. Dividing gross pay for the pay period by the number of hours worked gives the hourly rate.

But many homeworkers are paid by not by the hour but by what they produce (their output), or paid on completion of a specific job. The existing ‘fair estimate agreements’ with employers, which set out how long a particular task is likely to take (no shorter than four-fifths of the time that it would take the average worker to complete the task), can be used to calculate hours, but these agreements have been much abused by employers, and workers are usually reluctant to complain for fear of losing work.

This abuse has led the Government to replace fair estimate agreements with a new system of ‘fair piece rates’. From April 2005, an employer will either have to pay the worker the minimum wage per hour for all hours worked or will have to pay 120% of the minimum wage for the number of hours it takes an average worker to complete an agreed block of work.

The employer will have to carry out tests to establish the time it takes an average worker to complete the work. For example, if the tests show that for a particular job, the average worker can complete 10 pieces an hour, the employer must pay the workers at least 68.7 pence per piece in order to pay the current national minimum wage rate of £5.73 per hour (£5.73 times 120% divided by 10 pieces equals 68.7p).

The 120% calculation has been introduced to reflect that whilst the average (mean) worker may complete the work that quickly, this means that 50% of workers will complete it more slowly, and so be paid under the minimum if it were set only at 100% of the National Minimum Wage. The 120% calculation brings a higher proportion of piece rate workers under minimum wage protection.

If you think that you are not being paid the NMW you can make a complaint directly to the NMW Helpline on 0845 6000 678 (England, Scotland or Wales) or 0845 6500 207 (Northern Ireland).

You can also seek further advice from the National Group on Homeworking, your union if you are a member, or an advice agency.

The Government has published some guidance on fair piece rates at www.dti.gov.uk/er/nmw/fpr_final_guidance.pdf