20 FAQs people ask about the minimum wage
The main rate for those aged 21 and over is £6.70 an hour (since 1 October 2015).
The development rate which applies to workers aged 18 to 20 inclusive (sometimes called the youth rate) is £5.30 an hour.
The rate for those aged 16 and 17 (except apprentices) is £3.87 an hour.
Apprentices under the age of 19, or older than this but in the first year of the apprenticeship period, are entitled to a minimum of £3.30 an hour. Thereafter, apprentices aged 19 to 20 must be paid at least the development rate, and older apprentices must be paid at least the adult rate.
From April 2016 a new National Living Wage will also be introduced which will apply to all workers aged over 25. It will be set at £7.20 per hour.
Almost all workers in the UK are entitled to receive the minimum wage. Those who must be paid the minimum wage include full and part-time employees, homeworkers, piece workers, agency workers, migrant workers and casual workers. Workers do not require a contract in order to be eligible for the minimum wage.
Some workers are not entitled to the minimum wage. These include:
The average pay for each hour of work completed by eligible workers during any pay period must not fall below the minimum wage.
You should pay all 16 and 17 year-olds (other than apprentices) at least £3.87 an hour.
The development rate (£5.30 an hour) only applies to:
Apprentices under the age of 19, or older than this but in the first year of the apprenticeship period, are entitled to a minimum of £3.30 an hour.
Yes - unless they are undertaking accredited training under a written agreement, in which case you can pay the training rate (which is the same as the development rate - see 1). The definition of accredited training varies according to where you are based (England, Scotland or Wales), but they must train on at least 26 days during the first six months, although the training does not have to take all day. You may only pay them the training rate for six months.
No. Workers cannot sign away their rights. If a worker is over 18, and is not a family member living in the family home and working within the family business, you cannot pay them less than the national minimum wage — unless they are working for therapeutic reasons only, with no contractual obligation to work at all, and no right to any payment or benefit (ie they are a voluntary worker).
Almost certainly yes. If they are operating under some form of contract, express or implied, oral or in writing, to provide you with work or services, and you reward this with some sort of 'consideration' (usually money), then unless you can prove otherwise they will be a 'worker', and all workers are entitled to at least the minimum wage.
Your best chance of proving otherwise lies in abandoning any mutuality of obligation - that is, make sure it is clear that you are not obliged to provide them with work and they are not obliged to do it if you do. But even if both of you could live with this, you could have a hard time from HM Revenue and Customs (the policing body), not to mention the Employment Tribunal or County Court and the various disability organisations, if it gets investigated. You can pay them for their expenses only, without creating a worker's contract, and you might be able to pay them a daily allowance for coming in, providing you don't oblige them to work when they come in, or penalise them for failing to do so.
Be aware that if you take someone on and then dismiss them because you find you have to pay them the minimum wage, you subject them to an illegal 'detriment', and they may be able to sue you for unfair dismissal. Take professional advice if you find yourself in this position.
No. If you are the employer, they are members of your family, and they share your family home, you are not obliged to pay them the minimum wage. With children who have moved away from home, however - or a wife or husband who has moved out - you would be obliged to pay it, as they are no longer living within the family.
You must ensure that you are paying the minimum wage during each 'pay reference period'. This is normally the period over which you pay people - for example, weekly or monthly. It cannot be longer than a calendar month. However, you can base your calculation not only on the amount paid for that period, but also on the amount earned during it - for example, by way of bonus or commission - provided that the extra earned is paid in the next pay reference period. Obviously you cannot then count that extra towards the minimum wage in the second pay reference period - that would be double counting.
You have to strip out any overtime premium from the sum that you include in your calculations. To find the premium, you take the lowest rate that you pay each employee for the same work during normal hours, and deduct that from the amount that you pay in overtime. So for the purposes of calculating the minimum wage, you are effectively paying people for overtime at the lowest rate that you would pay for normal working.
If they are genuinely self-employed - that is, they have freedom to work for others, can refuse work, set their own hours, incur their own expenses, deal with their own losses and so on - they are not covered by the legislation. Otherwise they are.
If they are covered, and you require them to work during given hours, you have to pay at least the minimum wage for each hour worked. If they are literally paid by the piece, you must either pay them the minimum wage for the period actually worked, or introduce a system known as 'rated output work'.
To apply the rated output system, you must have conducted a test to determine the average speed at which the job can be completed. (In some circumstances you can adapt a previous test to make an estimate.) This test has to be undertaken using all workers, or a representative sample of workers, and in similar conditions to those of the piece rate workers - for example, it is not acceptable to base the test on the use of much better machinery than they will have. You must then issue the piece rate worker, in advance, with a notice which:
Read more about how to work out wages using the rated output system on the GOV.UK website.
You are required to pay 120% of the minimum wage for the time established by the testing procedure. Since the onus is always on you to be able to prove that you complied with the National Minimum Wage legislation, be sure to keep adequate records if you use the rated output system.
Possibly. The Employment Appeals Tribunal has recently made a judgment in a similar case, establishing that the important points are:
In particular the Employment Appeals Tribunal said that tribunals:
If you employ the delivery driver on an occasional basis, as and when your deliveries are required, and not always then; and if they have no compunction about turning you down or sub-contracting the work if they are busy, they are obviously much less likely to be considered one of your ‘workers’ than if they make regular deliveries for you every Friday, and keep their Fridays free so they can do them personally.
In a case in 2008 involving a contractor providing services, the AA was found to be an employer and the contractor an employee by the High Court, on grounds that included the facts their work:
The contractor therefore fell “on the employment side” of the line between employee and contractor.
If you suspect you may have acquired a worker without intending to, take professional advice.
You can attribute a value to accommodation, when calculating whether your employees receive the minimum wage, but the value has to be calculated by a formula: £37.45 per week that the accommodation is provided. If the accommodation you are providing is worth more than that, you will either have to take the loss or ask the employees to make a contribution — either way, the excess cannot be counted towards the minimum wage.
No - a recent case in the Court of Appeal has confirmed that employers must pay their employees at least the minimum wage regardless of any additional tips, gratuities or service charges they may obtain as part of their job. Even if all the tips are collected, pooled and divided equally, but by an employee designated as the 'tronc holder' - so that you know how much employees are making from them - you cannot include this figure when calculating whether your employees are receiving the minimum wage.
No. The only benefit-in-kind to which any value can be attributed is accommodation (see 12).
Yes, if the travelling is done on your business. However, you can exclude travelling between home and work - and that applies even if work is being done well away from your normal work site. You can also exclude rest breaks while travelling, although only if the employee has some choice over how those rest breaks are taken.
However, in a recent case the European Court of Justice judged that time spent by mobile workers - those with no 'fixed place of work' - travelling to their first job of the day and home after their last job of the day should be counted as working time. The impact of this decision is currently being assessed, particularly as to any effects on NMW.
There has been some to-ing and fro-ing over this. Current official guidance says that, if you specify hours when people may sleep in their employment contract, and you provide them with suitable sleeping facilities, then you do not have to pay them for those hours, except insofar as any work is done in them. If you do not specify any sleeping time, however, an Employment Tribunal might require you to pay for the whole of the time that the worker is at work.
The European Commission has obtained agreement that on-call time will be defined much more precisely, to differentiate it from working time and rest time. The proposal is to define 'active' on-call time, which will count as working time, as time which workers are required to spend at your premises, but during which they are not required to perform any duties. However, this change is yet to be implemented through legislation in the UK.
There are no strict requirements set out, but all employers must hold sufficient records to establish that they are paying workers at least the national minimum wage. You need to keep records because the onus of proving that you have paid the minimum wage is on you. If one of your workers (or ex-workers) claims that they have not been paid enough, it is not up to them to establish that they are telling the truth; it is up to you to prove that they are not. So keep sufficient records of hours worked and wages paid, together with ancillary evidence such as training agreements (see 3), details of rated output work (see 9), or 'daily average' of hours worked agreements. You need to keep your records for at least three years.
Yes. You must provide the information within 14 days of receiving a written request. Otherwise the employee can go to an Employment Tribunal, which may impose penalties on you.
If you failed to comply with an enforcement notice, you would be served with a notice of underpayment, requiring you to pay the arrears to each named employee and a financial penalty. The penalty is 100% of the unpaid wages owed to workers with a maximum penalty of £20,000 per worker that has not been paid the NMW. If you comply with the notice of underpayment within 14 days you will receive a 50% reduction on the penalty charge.
You will be required to pay the current rate of minimum wage for the whole period of underpayment, even if lower rates of minimum wage were in force for some of that period.
You could also be prosecuted in the criminal courts for a range of offences associated with the minimum wage, including a deliberate refusal to pay it, falsifying the records, or attempting to mislead HM Revenue and Customs (which is the investigating authority). If convicted of any of these offences you could be subject to an unlimited fine.
Yes. The minimum wage was originally brought in (at £3.60 an hour for adults, and £3.00 an hour for 18-21 year olds) in April 1999. Subject to the exceptions for family or voluntary workers (see 4 and 5), anyone who has worked for you since then at less than the minimum wage can require you to pay the difference. There is an overall limit of six years on the amount of arrears that can be claimed, however you can't make a claim more than six years after the arrears were due.