National Minimum Wage
Almost all workers are entitled to the National Minimum Wage. Below you will find out more about the National Minimum Wage such as who's entitled to it, how it's worked out and what to do if someone has been under paid.
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to. The National Living Wage is higher than the National Minimum Wage. From 1 April 2021 workers get it if they’re over 23.
The minimum wage a worker should get depends on their age and if they’re an apprentice.
Type of work
The National Minimum Wage is worked out at an hourly rate, but it applies to all eligible workers even if they’re not paid by the hour.
This means that however someone gets paid, they still need to work out their equivalent hourly rate to see if they’re getting the minimum wage.
There are different ways of checking that workers get the minimum wage depending on whether they are:
- paid by the hour (known as ‘time work’)
- paid an annual salary, under a contract for a basic number of hours each year (known as ‘salaried hours’)
- paid by the piece - the number of things they make, or tasks they complete (known as ‘output work’)
- paid in other ways (known as ‘unmeasured work’)
The rules regarding what counts as 'working time' for which the minimum wage is payable apply differently for each type of work.
Common causes of underpayment
Deductions from pay for items or expenses connected with the job
Any deductions made from a worker’s pay for items or expenses that are connected with the job reduce a worker’s pay for minimum wage purposes. Including payments made by a worker to their employer. For example, uniforms, tools or other equipment needed for the job.
Payment of all working time
If a worker is paid by the hour, then they are generally considered to be working if they are:
- at work and required to be at work – this includes time spent carrying out tasks before/after the shift starts/ends or working outside normal hours
- travelling for business or training
- on standby or on-call or near their place of work
Employers need to pay their workers for all of the working times listed above.
Overtime and shift premiums
A worker’s pay for minimum wage purposes must be calculated in a particular way. This is because some elements of pay do not count. Wrongly including an element such as an extra amount for overtime or shift work can make it look like the minimum wage is being paid when in fact it is not.
Tips and gratuities from customers
Tips and gratuities do not count towards paying the minimum wage. It does not matter whether they are paid through a payroll or are given direct to workers by customers or a troncmaster.
Benefits in kind and accommodation
Benefits in kind, except accommodation, do not count towards paying the minimum wage. If benefits are offered to a worker, the value of these benefits can’t be counted towards their pay for minimum wage purposes.
Accommodation provided to a worker is the only benefit in kind that counts towards a worker’s pay for minimum wage purposes. The rules allow a daily amount called the ‘accommodation offset’ to count towards the minimum wage.
Apprentices must be paid at least the minimum wage for all the time they work, including time spent on training or studying as part of their apprenticeship.
Work experience and internships
If work experience is offered, including placements and internships, then employers need to consider if the minimum wage should be paid.
Unpaid work trial periods
Employers who do not pay at least the minimum wage for work trials should consider whether this meets the requirements of the National Minimum Wage legislation.
What to do if underpayment has occurred
- Put the issue right straight away - change the affected working practices and ensure that all workers are being paid correctly going forward.
- Pay any underpaid amounts to all affected workers.
Work out the amounts owed by calculating, for each pay reference period, how much has been underpaid. For any underpayment that relates back to previous financial years, increase these amounts by applying the current minimum wage rates. This is the correct way to deal with underpayment and it is how HM Revenue & Customs (HMRC) would calculate arrears of pay if they found underpayment as part of an employer investigation.
Make the payments of all owed amounts directly to the affected workers. Do this directly through payroll if the individual is still employed. You may need to apply tax and National Insurance Contributions deductions to the amounts.
If the underpaid individual no longer works for you, make all reasonable attempts to contact them using the most up to date information you have.
If an employer owes a worker any arrears they have to pay these back.
If you think you have been underpaid the minimum wage, you should talk to your employer first. If this does not solve the problem, either:
- call the Acas helpline on 0300 123 1100 for help solving a payment dispute, or
- make a complaint about your employer direct to HMRC via an online complaint form
You can make a complaint about a current or previous employer or complain on behalf of someone else.
Find out more about how to complain to HMRC if you are not paid correctly.
The costs of getting it wrong
Employers who fail to comply with minimum wage legislation are subject to enforcement action by HMRC. HMRC officers have the right to carry out checks at any time and ask to see payment records. They can also investigate employers if a worker complains to them.
If HMRC finds that an employer has underpaid the minimum wage, any arrears have to be paid back immediately. There will also be a fine and offenders might be named by the government.
Guidance to help employers meet National Minimum Wage legislation is available at Gov.UK