LOW PAY UNIT - ADVICE LEAFLET

National Minimum Wage

The National Minimum Wage (NMW) came into force in the UK on 1 April 1999. It is part of a package of new rights, such as the right to annual leave, that mark a new direction in employment law after the last two decades of deregulation.

It is estimated that 1.2 million people are benefitting from the NMW. The majority are women and young people working in hotel and catering, retail, the care industry and the clothing sector.

The NMW is an absolute minimum workers should receive. Workers or their trade union representatives should, wherever possible, try to negotiate a better deal building on the minimum. See ERAS leaflet Get a Better Deal.

This leaflet gives the main details of the NMW as contained in the National Minimum Wage Act and Regulations. Please contact ERAS if you have a query or want further information on any aspect.

Who is entitled to the NMW?

Full- and part-time workers are entitled to the NMW, as are pieceworkers, homeworkers and agency workers. The general rule is that all workers aged 18 and over are entitled to the NMW - however, there are some important exceptions.

Who is not entitled?

• 16 and 17 year olds;
• Apprentices (including those on Modern Apprenticeships and National Traineeships) under 26 who are within the first 12 months of their employment and/or have not reached 19;
• Trainees on Government funded training schemes who are not employed on a contract and/or are not entitled to be paid for any work they do, eg. those doing Worktrial or voluntary-option New Deal;
• Students doing work experience as part of a higher education course
• People working and living as part of a family (e.g. au pairs) and family members who work for the family business;
• genuine volunteer workers;
• the genuinely self-employed.
• members of the armed forces;
• share fishermen;
• prisoners

How much is the NMW?

If you do not fall into one of the exceptions above:

Accredited training means courses leading to qualifications such as NVQs, City and Guilds, National Proficiency Test Certificates or which include at least 50% of the relevant requirements for NVQs. The training must be agreed in writing with your employer. The NMW should be paid for training time, provided it has been approved by the employer and is done during normal working time.

Are homeworkers covered?

The NMW Act makes clear that homeworkers are entitled to the NMW. Where homeworkers are paid by output rather than time should be paid at least the NMW, on average, for the time they work.

Workers must keep a record of their hours. There must be an agreement between the worker and the employer setting out a 'fair estimate' of the hours the worker is likely to work in a week. This estimate must be at least 4/5ths of the hours an 'average worker' would take to do the same work in the same working conditions.

Employers must be able to show that they have evaluated their piecework rates to make sure they are paying at least the NMW.

What work will the NMW be paid for?

There are 4 categories of work for which the NMW should be paid:

• 'time work' - work that is paid for by reference to a period of time, e.g. 7 hours a day, 5 days a week;
• 'salaried hours work' - work by reference to basic hours where a worker is paid an annual salary by equal instalments, e.g. 'annualised hours' workers;
• 'output work' - work that is paid for by reference to the number of pieces or;
• sales made by the worker, i.e. piecework or commission work;
• 'unmeasured work' - work that is neither of the above, e.g. workers who live on the premises and need to be available all the time.

In addition, the NMW should be paid for 'standby time' or 'downtime' if the worker is required to wait at or near the place of work; but:

1. Workers who sleep on the employer's premises and are 'on call' (e.g. careworkers) will only be paid the NMW for the time they are awake and working. An allowance should be agreed with employers for 'sleep-ins' but is not required under the NMW.
2. The NMW does not have to be paid for 'on-call time' away from the employer's premises.

What counts towards the NMW?

Workers must be paid the NMW for 'standard work' averaged over the pay reference period (if you are paid weekly, this will be a week). Some elements of pay will count towards the NMW on top of gross basic pay. These include:

• incentive payments - e.g.performance related pay, profit related pay, payment by results;
• tips and gratuities - only if paid or distributed through the payroll (i.e. cash tips do not count);
• a maximum of £22.75 per week (the lower of 57p per hour or £3.25 per day) for the provision of living accommodation (increased from 50p or £2.85 per day on October 1 2001).

Elements which do not count towards the NMW include:

• overtime and shift premium rates;
• allowances which are not attributable to the performance of the worker, e.g. London weighting or payment for extra duties;
• payments for working in dangerous conditions;
• benefits in kind like company cars, free meals, luncheon vouchers.

Contact ERAS for advice on working out whether you are receiving the NMW.

Travelling time

Time when you are travelling for the purpose of your work shall be treated as time for which the NMW is payable provided you are travelling when you would otherwise be working. Travelling time from home to work and vice versa is not covered by the NMW.

Training time

A worker must be paid the NMW for time spent training at or away from the workplace during normal working hours.

Time off work

Apart from travel time and training time, periods when workers are absent from work (e.g. for sickness or maternity) do not count as time when the NMW is payable. Workers may be entitled to pay for these periods under their contracts or other legislation. When workers are taking industrial action they are counted as being absent from work.

Record-keeping

Employers are required to keep records that are sufficient to show that they are paying workers at least the NMW rate. They must be kept for at least three years from the end of the pay reference period following the one to which they relate.

Employers are obliged to provide workers with an itemised pay statement but are not required to include what the NMW level is or to state that the NMW is being paid.

What if the NMW is not being paid properly?

The Inland Revenue is responsible for enforcing the NMW. If you think you are not receiving the NMW you should call the NMW helpline to get them to investigate on 0845 6000 678 (or 0845 6500207 if you live in Northern Ireland). (Calls charged at local rate). You can also contact the IR by e-mail. You can call the IR anonymously, although it is easier for them to take action if they are able to contact you on an ongoing basis. If you request, the IR will not tell your employer who contacted them, although this may be obvious if the place where you work is small or you are the only person in a particular role.

You may prefer to discuss your situation with ERAS or a local advice centre before calling the IR. Ultimately, your right to the NMW is enforceable in an Employment Tribunal or the civil courts.

What if a worker is victimised/dismissed for claiming the NMW?

Workers who are 'subjected to any detriment', e.g. their hours are reduced, or dismissed because they are or will be entitled to the NMW have the right to complain to an Employment Tribunal from the first day of their employment.

For further details contact:

ERAS
Advice line: 020 7413 7385

Visit the Inland Revenue website for information and NMW publications or

see our links section for other sources of advice.