Minimum Wage Advice

The National Minimum Wage (NMW) came into force in the UK on 1 April 1999. Together with the new right to paid annual leave and the right to work no more than 48 hours a week, this marks a new direction in employment law after the last two decades of deregulation.

It is estimated that 1.9 million people will benefit from the NMW. The majority will be 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.

Who is entitled to the NMW?

Full- and part-time workers are entitled to the NMW, as are pieceworkers, homeworkers and agency workers. Genuine voluntary workers and those who are genuinely self-employed are not entitled to the NMW. The general rule is that 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;
• workers under 26 on an apprenticeship scheme who are within the first 12 months of their employment or have not reached 19;
• people working and living as part of a family (e.g. au pairs) and members of a family who work for the family business;
• workers participating in a scheme under which shelter is provided or which is designed to provide training, work experience or temporary work or to assist in seeking or obtaining work;
• the armed forces.

How much is the NMW?

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

• 18-21 year olds will be entitled to £3.00 an hour;
• adults aged 22 and over will be entitled to £3.60 an hour;
• anyone aged 22 and over in a new job with a new employer will be entitled to £3.20 an hour for the first 6 months of their job, provided they are on 'accredited training' on at least 26 days in that time.

Accredited training means courses leading to e.g. 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?

Homeworkers 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?

• '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 at the place of work and is required to be there; but:

1. (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'.
2. (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 £20 per week for the provision of living accommodation.

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 are entitled to pay for these periods under other legislation. When workers are taking industrial action they are counted as being absent from work.

Any right to a NMW statement?

There is no obligation on employers to provide a NMW statement. However, employers are obliged by existing law to provide workers with an itemised pay statement - for further details contact ERAS.

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.

What if the NMW is not being paid properly?

The Inland Revenue is responsible for enforcing the NMW. if you thinkyou are not receiving the NMW and you call them on 0845 6000 678 they will investigate your claim. You can call the IR anonymously, altough 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, altough 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.