Since April 1999 most workers in the UK have been legally entitled to a minimum wage. The national minimum wage (NMW) rates are set based on recommendations of an independent body, the Low Pay Commission (LPC). The current rates (as of October 2012) are:
The minimum wage is not applicable to:
Working time, for which the NMW will usually have to be paid, includes, for all types of work, time spent:
Not counted as working time is that spent:
Hours for which NMW must be paid
The number of hours for which you are obliged to pay your workers NMW is worked out differently according to the types of work they do. There are four types of work and the rules and calculation of hours differ for each. They are:
A time worker is one who is paid according to the number of hours they are at work. Time work is also where a worker is on a contract for a certain amount of time and is paid for the hours done. Basically, anybody whose pay goes up or down depending on the actual hours they work is likely to be doing time work.
For these workers, the average hourly pay has to be at least the NMW, worked out over the period each pay packet covers.
A worker is doing salaried hours work if they’re paid:
Salaried hours workers’ contracts don’t have to state the basic number of hours as an annual figure, but it must be possible to work this out. Employers can then use this figure to ensure the rate of pay is at least the NMW. To work out the hourly rate:
Output work is paid for according to the number of things that a worker makes or tasks they perform. It is also known as piece work or fair piece rates.
When paying output workers you can either:
The fair rate is the amount that allows an average worker to be paid the minimum wage per hour if they work at an average rate.
To work out the fair piece rate employers should:
To work out the average rate of work, employers should:
Note: If the work changes significantly, employers will need to do another test to work out the new average rate.
Unmeasured work is that which does not fall into any of the previous three categories. It could include work where tasks need to be done, but not within any specified hours or times, or work where you require the worker to work when needed or when work is available.
You must pay at least the national minimum wage (NMW) to people who do unmeasured work, and this could be done by either:
Daily average agreements of hours must:
Employers who do not pay their workers the NMW or falsify payment records are committing a criminal offence.
Workers who are found to be earning less than the minimum wage must be paid any arrears owed to them straight away by their employer.
HM Revenue & Customs (HMRC) officers have the power to carry out checks at any time and ask to see payment records. They can also investigate employers, following a worker’s complaint to them.
If HMRC finds that an employer hasn’t been paying the correct rates, any arrears have to be paid back immediately. There will also be a penalty.
It’s the employer’s responsibility to keep sufficient records proving that they are paying the minimum wage - most employers use their payroll records as proof. All records have to be kept for three years.
Sufficient records might include details of:
Workers who think their pay is below the minimum wage rate should talk to their employer first. If problem is not resolved, they can ask the employer in writing to see their payment records. The worker has the right to be accompanied and can make copies of the records. If arrears in NMW payments are found, these must be repaid.
Workers can also call the confidential helpline (0800 917 2368) to help them solve a payment dispute or fill in an enquiry form or a complaint form.
If the employer does not pay, HM Revenue & Customs (HMRC) can send them a notice for the arrears plus a penalty for not paying the minimum wage. If the employer still refuses to pay HMRC can take them to court on behalf of the worker.
Workers can also go directly to the employment tribunal. If they have been dismissed because of a NMW dispute, they can also take the employer to an employment tribunal for unfair dismissal.
There are six criminal offences relating to the NMW, each carrying a maximum fine of £5000. They are:
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