For 2017 we have updated our advice about the Minimum Wage.
Anyone who is defined as a ‘Worker’ (including Employees and Agency Workers) is entitled to the minimum wage (NMW) – you do not need a written contract to be eligible.
If you are an Intern or considering an Internship see our Interns article here.
If you a Care Worker please see our new article here about your entitlements to the National Minimum Wage.
In our article on The Gangmasters Licencing Authority (GLA) here , we look at their remit which is to protect workers from exploitation, including the NMW, in the following industries:
- Agriculture (including dairy farming)
- Fish processing and shellfish gathering
- Any associated processing and packaging (of food and drink products).
The National Minimum Wage:
There is a Government Helpline 0800 917 2368 and a website that offers more advice and information about the NMW – http://www.nmw.direct.gov.uk/index.html
The minimum wage is a legal right that covers almost all workers above compulsory school leaving age. There are different minimum wage rates for different age groups of workers as follows:
- From 1st April 2017 the new National Living wage will be £7.50 for workers aged 25 and over.
- From 1st April 2017 the National Minimum wage for workers aged between 21-24 is £7.05 per hour.
- The development rate for 18-20 year olds is £5.600 per hour from 1st April 2017.
- The development rate for 16-17 years olds from 1st April 2017 is £4.50 per hour from 1st October 2016, increasing to £4.50 from 1st April 2017. There are differences in the school leaving age in Scotland (to England and Wales) and this affects when the NMW should be received – see our article here for more details.
- Apprentices under 19, or aged 19 or over but in their first 12 months of apprenticeship must be paid a minimum of £3.50 per hour from 1st April 2017. See our Guide to Apprenticeships here. Apprentices aged 19 or over who have spent a year in their apprenticeship must be paid at least the NMW rate applicable to their age.
The new rules about employing school leavers now that the Government have changed the law on how long young people are required to stay in education or training are here.
From 1st October 2013, the National Minimum Wage will also cover Agricultural Workers for the first time – before their pay was covered by the Agricultural Wages Board. Agricultural Workers have slightly different rights to other workers, and more details are here.
In June 2008 the English High Court ruled that tips/gratuities/service charges (not paid through the employer’s payroll) cannot count towards the minimum wage and this became law on 1st October 2009.
In September 2015 the Government launched an investigation into the abuse of restaurant tipping, following reports of employers withholding tips from staff to cover administrative costs (there is currently no legal requirement for all or any of discretionary tips to be paid to workers). And in May 2016 launched a Consultation on tipping, gratuities, cover and service charges – this sets out proposals to make tipping fairer – the Consultation closes on 27th June 2016.
Workers who work on ‘piece work’ (or output work) have their NMW calculated slightly differently and you can read more details here.
From 18th June 2016 construction workers posted to the UK from another EU Member state must be paid the UK national minimum wage –
Posted Workers Enforcement (of Employment Rights) Regulations 2016
In July 2015 the Government produced a consultation document on how to implement the EU posting of Workers Enforcements Directive. The directive gives construction workers who are sent to another EU country by their employer or a recruitment agency the rights to claim back unpaid wages.
The document said that one of the key provisions of the directive is a subcontracting liability to ensure ‘posted’ workers (as they are called) in the construction sector can claim back unpaid wages (up to the level of the minimum wage) from the next contractor in the supply chain. The consultation is about 3 possible options to implement this:
- The creation of a right to bring to an Employment Tribunal a claim against the next contractor
- State enforcement of unpaid wages
- The creation of a financial sanction (civil penalty).
Consultation ended in September 2015 and the directive came into UK law on 18th June 2016. This means that construction workers posted to the UK from another member EU state must be paid the UK national minimum wage (and UK businesses who contract with them must ensure they comply). And can bring a claim to a Tribunal against the company immediately above their employer in the supply chain for non-payment.
To see a list of those excluded from the Minimum Wage click here – http://www.direct.gov.uk/en/Employment/Employees/TheNationalMinimumWage/DG_175114
For details of your pay rights during your notice period go to this link.
For details about Equal Pay see our Equality article here.
The National Minimum wage must be paid for all the time when you are:
- at work when required to be working (even if work is not possible because for example, machinery breaks down, materials have not arrived, work is not available)
- when you are on standby or on call time at or near your place of work
- travelling on business during normal working hours – you should be paid for all travel time in connection with your job (not to or from home to work) including travelling from one assignment to another (except if you are on a rest break), waiting for public transport connections, waiting to collect goods or start a job, travelling from work to training venues (not from home to training venues). This includes waiting to meet someone in connection with work and includes travelling for the purposes of doing ‘output’ or ‘unmeasured’ work (see below).
- The BBC reported on 13th March 2015 that MiHomeCare staff were being paid less than minimum wage. MiHomeCare is one of the largest care providers in the UK and an internal company document seen by the BBC confirmed they had not been paying its staff the minimum wage. The BBC also reported the practice of ‘Clipping‘ which means that care appointments are scheduled back to back and there is no travel time scheduled between visits. As a result, visits are clipped, or cut short. The company were nervous about the practice of clipping being made public. You can see the BBC’s news article here. In February 2016, law Firm Leigh Day successfully negotiated a settlement from MiHomeCare for one carer, Caroline Barlow. Caroline had taken legal action against her ex-employer after she was not paid for time spent travelling to and from appointments. Leigh Day argued that as she was not being paid for her travel time, she was being paid less than the national minimum wage which constituted an unlawful deduction of wages. The Company settled Caroline’s claim for her travel time. Leigh Day believes “there are potentially thousands more care workers, working for MiHomecare, and other care providers, who are being paid less than the National Minimum Wage”. You can read more details here.
- The European Court of Justice (ECJ) decided in September 2015 that travel time counts as working time. This applies when a worker does not have a fixed place of work but is required to travel from home at the beginning of the day to the premises of one his customers, and to return home from the premises of another existing customer – following a list or route that the employer has determined for the worker. NOTE – THIS IS NOT RELATED TO THE MINIMUM WAGE BUT ONLY TO TRAVEL TIME but we have included the information here for clarity – you can read the details here.
- training (or travelling to training) during your normal working hours, either at your normal place of work or somewhere else. This also applies to workers required to undertake training before starting work for an employer.
- For ‘salaried’ workers, if they are paid their normal salary when they are absent from work and this forms part of their contract; the time of absence counts for National Minimum wage purposes e.g. when on rest breaks, lunch breaks, holidays, sick leave or maternity leave.
For National Minimum Wage purposes there are 4 different types of work – time work, salaried hours work, output work and unmeasured work:
- If you are employed on ‘time work’ (you are paid an hourly rate in relation to the time you work and your hours may vary) – you should receive the NMW for all the time when you are at work working (excluding rest breaks); or at work and available for work; or required to be available for work on standby or on-call at or near your place of work and are working; or awake and working during ‘sleeping time’ at work (which is time when you are allowed to sleep as arranged with your Employer, who provides suitable facilities for you to do so at or near your workplace), and during time spent travelling on business. At the end of 2013, an important case Whittlestone v BJP Home Support Ltd confirmed that employees who are engaged on ‘time work’ who are required to ‘sleep over’ at a specified location as part of their work are entitled to be paid the NMW for all those hours, regardless of whether their sleep was interrupted by work or not – details are in our new Guide here.
- If you are employed on ‘salaried work’ (you are paid an annual salary for set hours – in equal installments – but your hours may vary) – you should receive the NMW for all the time when you are at work working (excluding rest breaks); or at work and available for work; or required to be available for work on standby or on-call at or near your place of work and are working; or awake and working during ‘sleeping time’ at work (which is time when you are allowed to sleep as arranged with your Employer, who provides suitable facilities for you to do so at or near your workplace), and time spent travelling on business.
- People who are paid on commission (who are paid entirely or partly on the basis of sales or deals made) or on output work/piecework (who are paid according to the amount they produce and do not have set hours or start/finish times) must still be paid at least the national minimum wage. These Workers do not have to paid the minimum wage for each hour worked, but they must be paid the minimum wage, on average, for the time worked in their pay ‘reference’ period. This ‘reference’ period is the period of time a worker’s wage is actually calculated, e.g. on a weekly or monthly basis, but cannot be longer than one calendar month. This includes time spent travelling on business and to other work premises (from home, if you are based at home).
- If you are employed in ‘unmeasured work’ (work that is not covered by any of the other 3 categories above – time; salaries, commission/outwork), so work, carrying out contractual duties for a flat rate, e.g. a home carer who lives and works in a client’s home before having a break. Or where there are certain tasks to be done but no specified hours or times when these tasks must be done. Determining what hours you should receive the NMW is difficult unless you are employed on a ‘daily average hours agreement’, which is a written agreement that determines the average number of daily hours the worker is likely to spend on their duties – and for these hours the NMW should be paid. Workers who have entered into a ‘daily hours agreement’ do not have to paid the minimum wage for each hour worked, but they must be paid the minimum wage, on average, for the time worked in their pay ‘reference’ period. This ‘reference’ period is the period of time a worker’s wage is actually calculated, e.g. on a weekly or monthly basis, but cannot be longer than one calendar month. Where a Worker has not entered into a ‘daily hours agreement’ but is employed in unmeasured work, their Employer must record the hours they work during the pay reference period and pay them for every hour worked. This includes time spent travelling on business and to other work premises (from home, if you are based at home).
- Agency workers and Homeworkers are expressly covered by the NMW.
- Apprentices receive the NMW for all their time spent working and training – where they are employed on a Contract of Apprenticeship, on a publically funded apprenticeship or working under an Apprenticeship Agreement.
- From 1st January 2011 an amendment to this law disallows Employers’ schemes that allow part of a workers pay to be replaced with expenses payments for travel which would mean this part of their pay was outside of the pay counted for national minimum wage purposes.
The National Minimum wage does not need to be paid for time when you are:
- being paid less than your normal pay, e.g. if you get half pay while on sick leave
- on any unpaid leave your Employer allows you to take
- on-call at home or at another location, but not at work and not working (unless you are actually working from home/the other location during this on-call time or are called out to attend work during this time).
- travelling between work and home or work and home (even if you return home during the working day, between ‘appointments’)
- traveling between home and work if you are going to a place that is not your normal place of employment (i.e. you do not get the NMW for any additional travelling time in these circumstances).
- a Worker who lives in their Employers home and shares in the household chores and leisure activities may not be entitled to the NMW if they are living with and being treated as part of the family (or are a member of the employers’ family) and are not paying the Employer for the provision of meals or accommodation.
N.B. Please note that the law relating to whether the NMW needs to be paid during ‘sleeping’ time whilst on-call and not working is complex and case law is changing constantly. Therefore please do not rely on our advice for your individual circumstances; it is guidance only and cannot be taken as an authoritative interpretation of the law. In 2012 an important case at the Employment Appeals Tribunal confirmed what previous case law had described – that during a sleeping night-shift, only the hours spent awake and working will count towards a workers National Minimum Wage – details are here. But at the end of 2013, an important case Whittlestone v BJP Home Support Ltd confirmed that employees who are engaged on ‘time work’ who are required to ‘sleep over’ at a specified location as part of their work are entitled to be paid the NMW for all those hours, regardless of whether their sleep was interrupted by work or not – details are in our new Guide here.
In February 2015 the Government published draft National Minimum wage Regulations – these Regulations repeal and re-enact all the law relating to the National Minimum Wage in the UK. There are not any substantive changes to the Regulations but that Government have said they intend to issue guidance to give clarity on issues such as the rules on sleeping time, travel time and the definition of rest breaks. This legislation was enacted on 6th April 2015 and you can see the Guidance for Employers and Employees here.
This Guidance says the following about Sleeping between duties:
Employers must look at whether a worker is still subject to certain work-related responsibilities whilst asleep. A worker who is ‘working’ even though they are asleep, is entitled to the NMW for the entire time they are at work. Someone can be ‘working’ whilst asleep if, for example, there is a statutory requirement for them to be present at work and they would face disciplinary action if they left the workplace (e.g. a person working in a care home where there must be someone on the premises).
Where a worker is only available for work and is allowed to sleep (and suitable sleeping facilities are provided at the workplace) they will not be ‘working’ and the NMW is not payable. They must be paid the NMW when they are actually awake for the purposes of working. For example, someone who lives in a flat above a pub who is required to sleep there but can come and go at night as they please – there are no specific responsibilities during the night apart from the fact the premises is occupied; so they will not be paid the NMW unless they do work.
In May 2017, in the combined appeals of Focus Care Agency Limited v Roberts, Frudd v The Partington Group Limited and Royal Mencap Society v Tomlinson-Blake, the EAT considered sleep-in shifts and if staff were only ‘working’ for NMW payment purposes while on a such a shift, and decided that “a multifactorial evaluation is required. No single factor is determinative and the relevance and weight of particular factors will vary with, and depend on, the context and circumstances of the particular case”.
They said the approach to use (for time and salaried workers) is:
- determine if the individual is ‘working’ by being present at the work-place even in periods where they are permitted to sleep. Whether someone is ‘working’ wont’ depend on there being a particular level of activity (they may have nothing to do or not very much). An individual can be ‘working’ by being present as they would be required to deal with anything that arises (e.g. a client becomes unwell or distressed), even if nothing happens.
- Consider the employer’s purpose in engaging the worker – is there a regulatory or contractual requirement to have a worker there during that particular period of time (if there is they are likely to be ‘working’ throughout the shift).
- Consider if the workers activities are restricted by the requirement to be present at the premises and available to the employer during these hours (e.g. can they leave the premises for any reason during their shift or would they be disciplined if they did this?).
- Consider the degree of the responsibility the worker has. Where there is limited responsibility it is likely they are not working (e.g. sleeping at the premises so they could all out the emergency services if there was a fire or robbery for example). However, if a carer has duties that have to be performed during the shift this is likely to be ‘working’.
- Consider how urgent the need for the worker to respond to incidents is. And is the worker themselves the person who intervenes in the incident (likely to be not ‘working’), or are they woken up by another worker who has immediate responsibility for intervening (who is likely to be ‘working’).
None of these factors carried more importance than the others.
The EAT applied this guidance to the Mencap case and held that the care worker, who provided care for 2 vulnerable adults who had local authority assessed care plans that required 24-hour support, was ‘working’ for her whole shift as the employer legally needed someone on the premises and the worker was required to use her professional judgement about when to intervene and respond to situations with the clients (although she had only intervened approximately 6 times in 16 months). Mencap are appealing this decision and it will be heard by the Court of Appeal in March 2017 (anticipated).
Following the Mencap decision, in the summer of 2017, the Government announced it was waiving historical financial penalties owed by Employers to the HMRC (who have underpaid their workers for sleep-in shifts prior to 26th July 2017. (This does not prevent workers bringing NMW claims; this only applies to HMRC penalties)
What pay should be taken into account when calculating your average hourly rate of pay (during a pay reference period):
- Your total gross pay (basic salary, any bonus or commission or incentive payments, overtime payments at basic rate pay) received or earned in that period.
- The only ‘benefit in kind’ that can be taken into account in NMW calculations is where your Employer provides you with accommodation. The NMW may be ‘offset’ by some of your accommodations value. From April 2017 the maximum that can be ‘offset’ is £6.40 per day (or £44.80 per week). For more details about how this works please see the Direct Gov page here.
- Benefits in kind that do not count towards the NMW calculation include meals, fuel, car allowances, employers contributions to pension schemes, medical insurance, child care vouchers, luncheon vouchers, Overtime payments at ‘premium’ rates are also not included.
- In 2015, Monsoon, the Fashion retailer, was found by the HM Revenue and Customs to be failing to pay the NMW to some of its employee because of its requirement for staff to wear only Monsoon clothes, at their own expense, while working. The HMRC said that because wearing these clothes was compulsory, the amount spent by the employee on clothes for work should have been deducted from their pay before calculating whether they received the NMW. Monsoon have since started paying their staff a clothing allowance. Such a ruling applies to, for example, to any company who requires their staff to wear a ‘uniform’ of any description which is bought partly or wholly at their employee’s own expense.
- Salary sacrifice schemes (such as Childcare vouchers) are excluded from the calculation as are loans and salary advances, pension and retirement payments and redundancy payments.
- Any premiums that are paid for overtime or shift work, weekend or bank-holiday working, or on-call/sleep-in shifts do generally NOT count towards calculating your salary for the NMW.
- Tips, service charges, cover charges and gratuities do not count.
- Repayment of expenses is not included in the calculation.
- Expenses for travel to a temporary workplace are not included.
- Special allowances paid above standard pay, e.g. for working in dangerous conditions, working unsocial hours, geographical payments (i.e. London Weighting), for performing special duties do not count (unless they are consolidated into the workers standard pay or they are related to the worker’s normal duties).
- The HMRC have a ‘watch’ list targeting practices by employers: – time spent on Security Checks at the workplace (bag searches etc) after finishing work is considered working time and staff should be paid the NMW for this time. Similarly time spent conducting team briefings should also be considered working time as should time spent on inductions.
The Government run a Pay and Work Rights Helpline which can advise you about the NMW – on 0800 917 2368 – and you can report NMW abuses to them on this number.
Your Employer must keep records that show they have paid the NMW for 3 years, and you have the right to inspect these records if you have reasonable grounds to believe you have not been paid the NMW; you may complain to an Employment Tribunal if you are not allowed to see these records.
Workers also have a right not to be subjected to any detriment caused by an act of their Employer because the worker had taken action to enforce their statutory right to be paid the NMW.
The National Minimum Wage Regulations are enforced by the HMRC who have compliance and enforcement officers and can prosecute Employers for not abiding by the NMW. From February 2014 the fines for Employers who do not pay their workers the national minimum wage increase from £5,000 up to £20,000. The Small Business, Enterprise and Employment Act (approved by Parliament in March 2015), which became effective from 1st April 2016 will allow for the maximum £20,000 penalty for non-payment to apply for each worker who has not been paid the NMW (not just one fine per non-compliance notice).
The potential penalties for Care Sector Employers who fail to pay the NMW will soon become greater.
In January 2015, in a programme entitled Low Pay Britain, Channel 4’s Dispatches reported on tax-avoiding practices by employment agencies and umbrella companies. The programme also highlighted methods used by agencies to ignore the provisions of the Agency Workers Regulations and ways to avoid paying the National Minimum Wage.
Overtime: (updated 2014)
- There is no legal right to pay for working extra hours.
- There is no legal right to extra pay for working extra hours.
- However, if your contract guarantees paid overtime then you should be paid for this. If your contract does not mention the exact rate to be paid then a ‘reasonable’ rate for the overtime should be paid. If your contract does not mention a right to be paid for overtime then there is no such right to be paid, unless an oral promise has been made.
- Your average pay must not be below the minimum wage (above).
- Some Employers may offer you ‘time off in lieu’ instead of pay for overtime.
- Overtime worked may or may not be taken into account when calculating holiday pay (see our Working Time Regulations Guide for more information) or paid maternity, paternity or adoption leave – it will depend whether overtime is specified in your contract of employment. However, see our 2014 article about calculating holiday pay including overtime here as things are changing.
- You only need to work overtime if your contact includes it and you should not work more than 48 hours per week (see Working Time Regulations Guide).
- Your Employer cannot stop you working overtime if your contract guarantees it.
- There are special rules for Sunday working – see our Workline guide and this Direct Gov page.
For details on Equal Pay please see our Guide to the Equality Act 2010 here.
Unpaid Work Experience/Interns:
The minimum wage legislation can make unpaid work experience/internships a grey area, as anyone defined as a ‘worker’ is entitled to a minimum wage. Government guidelines say that if someone is taken on solely as a ‘volunteer’ for the reason of giving them skills/training, rather than in a normal employee-employer relationship, then this can be unpaid – as long as they have no set hours, are under no obligation to perform the work and can come and go freely.
- For further details about Internships/work experience and whether they should be paid or not see our Interns article here.
- Students doing work experience as part of a higher or further education course are not entitled to the minimum wage if the work experience they undertake is for under a years duration.
- Skillset have published guidelines for work experience placements in the TV industry; more details of how the national minimum wage applies (and other useful information for employers and those on work experience placements) is contained in these guidelines at Annex A.
- ACAS, Skillset and PACT recommend that unpaid work experience should never be longer than for four weeks.
If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.
Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.