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Do you comply with National Minimum Wage rules? by Pauline Holt, PA to MD, Bridgwater office

7th December 2014

Do you comply with National Minimum Wage rules? by Pauline Holt, PA to MD, Bridgwater office

Workers (with a few exceptions) are entitled to receive at least the National Minimum Wage (NMW). This includes temporary, part-time, casual, agency and homeworkers. The rate of NMW was increased on 1 October 2014, so it might be good to check now if you are still compliant.

(This may change again in October 2015)

There are four rates of NMW:

  • the main rate of £6.50 an hour, applies to all employees aged 21 or over (unless exempt or another rate applies)
  • All workers aged 18 to 20 inclusive – £5.13.
  • 16 and 17-year-olds who are above compulsory school leaving age – £3.79
  • apprentices under the age of 19, or older than this but in the first year of an apprenticeship, are entitled to a minimum of £2.73 an hour. After year one they must be paid the rate applicable to their age.

Exceptions to NMW rules – You do not have to pay the minimum wage to:

  • family members who live at home or others who live in your home and who are treated as family members (e.g. au pairs and nannies)
  • workers participating in the European Community Erasmus and Comenius Programmes
  • the genuinely self-employed – workers that are free to work for others, can refuse work, set their own hours, incur their own expenses, deal with their own losses and so on
  • voluntary workers – those with no contractual obligation to work

Working out whether you are paying NMW – You must pay the minimum wage in the period for which you normally pay people — for example, weekly or monthly. It cannot be longer than a calendar month.

When working out NMW, you must ignore any tips and gratuities received – even if all the tips are collected and divided equally. You must also ignore any other benefits-in-kind. You should then subtract any overtime you have paid. The result should equal or exceed the hourly NMW when divided by the number of hours worked.

Record keeping – You must hold sufficient records for at least three years to demonstrate that you are paying workers at least the NMW. Keep records of hours worked and wages paid, together with any other relevant evidence such as training agreements. If an employee believes they have not been paid the NMW, they can request records in writing. You must provide these within 14 days or the employee can go to an Employment Tribunal which may impose penalties.

Non-compliance – Since April 1999, anyone who has worked for you at less than the minimum wage can request the difference, even after they have left. A maximum of six years arrears can be claimed, provided it is within six years of when the arrears were due. You will be required to pay the current rate of NMW for the whole period of underpayment, even if lower rates of minimum wage were in force at the time.

If you fail to pay NMW, you could be served with a notice requiring you to pay the arrears as well as a financial penalty. You could also be prosecuted for a range of offences and subject to an unlimited fine.                                 

If in doubt, take legal advice!





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