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National minimum wage - Is your business compliant ?

Updated: Nov 6, 2019

The national minimum wage applies to all workers (including employees and agency workers) even if you don't have a written contract.


The National Minimum Wage


The minimum wage is a legal right that covers almost all workers above compulsory school leaving age. As of 9th April 2019, there are different minimum wage rates for different age groups of workers as follows:


National Minimum wage: £8.21 from April 2019.


National Minimum Wage: Ages 21-24 is £7.70; 18-20 is £6.15 and £4.35 for 16-17 year olds.


Apprentices: under 19 £3.90. Ages 19 with over a year on the job are to be paid NMW


Agricultural Workers work on a graded system that is slightly more complex more information on this scheme can be found at


https://www.gov.uk/agricultural-workers-rights/pay-and-overtime


Workers who work on ‘piece work’ (or output work) have their NMW calculated slightly differently this link from ACAS is quite clear on the guidelines:


https://www.acas.org.uk/index.aspx?articleid=4758


There are some circumstances where the NMW would not apply a list of types of workers that are excluded from the legislation can be found here:


https://www.gov.uk/national-minimum-wage/who-gets-the-minimum-wage


When should the NMW be paid?


The National Minimum Wage must be paid for all the time you are:


At work when required (even when work is prevented by broken machinery etc).When you’re on standby or on call time at or near your place of work.Travelling on business during normal working hours – you should be paid for all travel time in connection with your job (not standard to and from work journey), including travelling from one assignment to another (except if you’re on a rest break), waiting for public transport connections, waiting to collect goods or start a job, travelling from work to training venues (not from home to training venues). Training (or travelling to training) during your normal working hours, either at your normal place of work or somewhere else.


This also applies to workers required to undertake training before starting work for an employer. For ‘salaried’ workers who are paid their normal salary when they’re absent from work, which forms part of their contract, the time of absence counts for National Minimum Wage purposes, e.g. when on rest breaks, lunch breaks, holidays, sick leave or maternity leave.


In 2018, unpaid ‘trial shifts’ were in the news frequently, and at the end of the year, the government published guidance on the very limited instances when unpaid work trials may be legal. It’s important that employers are clear when they can ‘test’ applicants by asking them to do work without paying them.


When and how do companies get it wrong?


During the course of 2018, HMRC named and shamed nearly 180 companies (mostly larger corporations) that had failed to comply with NMW.


MiHomeCare - The BBC reported that MiHomeCare was not compliant for NMW. This came about for not being paid for travel in between home care calls. In not being paid for travel time employees wage was under the NMW.


Wagamama, TGI Fridays,Karen Millen - In 2018 breached NMW rules when they failed to compensate staff for having to buy ‘casual’ uniforms. TGIF and Wagamama required staff to purchase black shoes or black jeans/skirt to wear to work. In cases like these the workers should have received an additional payment to compensate them for buying clothes, if buying these items brings their pay below NMW/NLW rates.


Argos - In 2017 they breached the NMW by making staff attend unpaid meetings and undergo lengthy security checks outside working hours.


What about other pay circumstances?


Salaried work


If you’re employed on ‘salaried work’ (you’re paid an annual salary for set hours – in equal instalments – but your hours may vary), you should receive the NMW for all the time when you’re: at work performing your duties (excluding rest breaks)at work and available for work; working where you’re required to be available for work on standby or on-call at or near your place of work-awake and working during ‘sleeping time’ at work (which is time you’re allowed to sleep as arranged with your employer, who provides suitable facilities for you to do so at or near your workplace) spending time spent travelling on business.


Commission


People who are paid on commission (entirely or partly on the basis of sales or deals made) or on output work/piecework (who are paid according to the amount they produce and don’t have set hours or start/finish times) must still be paid at least the National Minimum Wage.

These workers don’t have to be paid the minimum wage for each hour worked, but they must be paid the minimum wage, on average, for the time worked in their pay ‘reference’ period. This ‘reference’ period is the period of time a worker’s wage is actually calculated, e.g. on a weekly or monthly basis, but cannot be longer than one calendar month. This includes time spent travelling on business and to other work premises (from home, if you’re based there.


Overtime


Overtime normally means any hours worked over and above your normal contractual working hours. However, there are different types of overtime:


Guaranteed overtime – an employer is required to offer overtime


Non-guaranteed overtime – an employer does not have to offer overtime


Voluntary overtime – an employee is not required to do any over-time but can accept it if they wish


Compulsory overtime – an employee is required to do any over-time offered by the Employer.

There’s no legal right to pay employees for working extra hours. However, there are some extra caveats and clauses you need to be aware of when it comes to working overtime:


If your contract guarantees paid overtime, you should be paid for this. If your contract doesn’t mention the exact rate to be paid, a reasonable rate for the overtime should be paid. If your contract doesn’t mention a right to be paid for overtime, there’s no right to be paid, unless an oral promise has been made. Your average pay mustn’t be below the minimum wage. Some employers may offer you ‘time off in lieu’ instead of pay for overtime. Overtime worked may or may not be taken into account when calculating holiday pay or paid maternity, paternity or adoption leave. It will depend whether overtime is specified in your contract of employment. Your employer cannot stop you working overtime if your contract guarantees it.


What about interns and apprentices?


The minimum wage legislation can make unpaid work experience/internships a grey area, as anyone defined as a ‘worker’ is entitled to a minimum wage. Government guidelines say that if someone is taken on solely as a volunteer, for the reason of giving them skills/training, rather than in a normal employee-employer relationship, this can be paid – as long as they have no set hours, are under no obligation to perform the work and can come and go freely.


Students doing work experience as part of a higher or further education course aren’t entitled to the minimum wage if the work experience they undertake is for under a year’s duration.

Skillset have published guidelines for work experience placements in the TV industry; more details of how the National Minimum Wage applies (and other useful information for employers and those on work experience placements) is contained in these guidelines at Annex A. ACAS, Skillset and PACT recommend that unpaid work experience should never be longer than four weeks.


What are the consequences of getting it wrong?


The National Minimum Wage Regulations are enforced by the HMRC, who employ compliance and enforcement officers and prosecute employers for not abiding by the NMW. From February 2014, the fines for employers who don’t pay their workers the National Minimum Wage increase from £5,000 up to £20,000. The Small Business, Enterprise and Employment Act (approved by Parliament in March 2015), which became effective from 1st April 2016, will allow for the maximum £20,000 penalty for non-payment to apply for each worker who hasn’t been paid the NMW (not just one fine per non-compliance notice).


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