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Minimum Wage

In the UK a national minimum wage is set by the National Minimum Wage Act 1998, and subsequent regulations. This legislation came into force on the 1st April 1999.

The minimum wage for workers aged 25 and upwards was altered with the introduction of the National Living Wage. subsequently the eligibility for the National Living Wage has been extended to cover workers aged 23 and over.

For workers aged under 23 years old, the National Minimum Wage sets the minimum hourly rate at which they must be paid. The applicable rates of pay set under the Regulations are set by reference to the age of the relevant worker concerned. The rates have varied over time since the law and regulations related to it were introduced. From 1st April 2023 the applicable rates are as follows:-Age 23 and over the rate is £10.42 per hour, Age 22 and 21 £10.18 per hour, Under Age 18 the rate is £5.28 per hour nb In England you must stay in some form of education or training until the end of the academic year when you turn 17 years of age, if you left year 11 in the summer of 2013. This does not necessarily mean having to stay at school, it can include any other full-time education such as at a college, or being on an apprenticeship, or in full time work (of over 20 hours a week) combined with some part-time education or training.

An "Apprentice" rate  of £5.28 per hour applies for apprentices under the age of 19 years or those in the first year of an apprenticeship. If you are over 19 or over and past your first year of apprenticeship the rate of pay applicable to the actual age will apply to you.

The Accommodation costs incurred by the employer in providing the worker with accommodation can be off-set the payment of the Minimum Wage, but subject to certain limits. Since the 1st April 2023 the limit is £9.10 per day or £ 63.70 per week as a maximum. From April 2022 the rates had been £8.70 per day or £60.90 per week as a maximum.

Since the 1st October 2009 the National Minimum Wage Regulations  specifically prevent tips from being treated as going towards the National Minimum Wage.

The hourly rates are gross figures, ie before relevant deductions for tax and national insurance.

All “workers” are entitled to be paid at a rate at least equal to the national minimum wage. The term “workers” includes employees, any “agency” staff, “casual” staff, home workers, “piece”-workers, and any contractors that undertake to personally perform any work or services to the other party.

There are only very limited exceptions from the entitlement to the National Minimum Wage.

The Regulations provide detailed calculations to enable people to ascertain if a worker has been paid the national minimum wage or not. Different calculations apply to: “salaried hours work” which addresses the situation where a worker is paid by reference to a contract stipulating a fixed number of hours pay, and is paid an annual salary in instalments; “time work”  where the worker is simply paid by reference to actual time worked, “output work” which covers piecework and pay by reference purely to “commission” payments; and “unmeasured work” A workers pay is determined by reference to a “relevant pay reference period” (basically the frequency e.g. monthly, or weekly); and all pay received in that period. For these purposes “pay” includes bonuses, commission, incentive pay, paid through a payroll. The general approach to benefits-in-kind is that they are NOT included when calculating the relevant pay. However the value of any accommodation provided by the employer is only to be disregarded over a set amount (see rates as set out above).

There are very limited sums that can be set-off the national minimum wage for accommodation provided by the employer (see above).No other costs can be set-off the National Minimum Wage (ie food, or travel costs  etc.)

Employers are obliged to maintain and keep records to enable them to demonstrate that each worker has been paid at least the national minimum wage. In any case in the Employment Tribunal or county court about non-payment the presumption will be that the minimum wage has NOT been paid, unless the employer can prove otherwise. This is an obvious additional reason for ensuring that detailed records of pay are kept by the employer.

Employers CANNOT reduce their payment liability by trying to exclude certain work time from the calculation of hours worked for payment of the national minimum wage. This means that staff “on-call” may be entitled to payment of at least the national minimum wage for the whole time they are on-call, particularly if they are required to be on the work premises throughout that period. This is of particular concern for care services, and security services. Some enforcement action can be taken by HM Revenue & Customs. Failure to maintain records of payment as required, the failure or wilful neglect to pay the national minimum wage, and the falsification of records are CRIMINAL offences. Therefore the proper production and retention of payment records MUST be done systematically, and taken very seriously.

Since the 7th March 2014 employers that fail to meet the obligation to pay the National Minimum Wage face increased penalties. Since that date employers can face fines of up to £20,000 for failing to pay the minimum wage.  Under the provisions since the 7th March 2014 the financial penalty percentage has increased from 50% to 200% of the total unpaid wages owed to workers (with a minimum fine of £100), and the maximum additional penalty increased from £5,000 to £20,000. A further reason for ensuring compliance is the fact that the Government is proposing making further amendments that will increase the penalties from a total maximum of £20,000 up to a maximum of £20,000 per each worker that has been underpaid.


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