The national minimum wage
The national minimum wage (NMW) sets minimum hourly rates that employers must pay their workers. It covers almost all workers in the UK and is divided into three rates that apply to workers of different ages.
National minimum wage – the three rates
There are 4 different national minimum wage rates, which are usually updated in October each year. The rates that apply are updated each year on this guide: National Minimum Wage (NMW): your rights in the UK
Who's entitled to the national minimum wage?
Almost all workers who work in the UK legally are entitled to the national minimum wage. But there are some groups who are not entitled, including:
• self-employed people
• children who are still of compulsory school age
All employers have to pay NMW to you if you are entitled to it. Every worker who is entitled to the national minimum wage must be paid at least their national minimum wage rate on average for every hour worked in each pay reference period. (The pay reference period is the interval at which you are paid – such as weekly or monthly, but it cannot be longer than a calendar month.)
It makes no difference:
• if you are paid weekly or monthly, by cheque, in cash or in another way
• if you work full time, part time or any other working pattern
• if you work at your employer’s own premises or elsewhere • what size your employer is
• where you work in the UK
You are entitled to the NMW even if you sign a contract agreeing to be paid at a lower rate, either of your own free will or because your employer persuades or makes you. The contract will have no legal effect and you must still be paid the proper rate.
What the NMW does not include
The NMW figure does not include expenses incurred during work (such as travel), additional money above basis pay such as overtime for shift work, reimbursement for costs of equipment to the job such as uniform. A very important point to note it that since 1 October 2009, service charges, tips, gratuities and cover charges can no longer make up your National Minimum Wage pay. In summary the NMW includes basic pay, overtime and commission, but the key staring point is of course basic pay. If your employer provides accommodation a certain amount per day or per week can count towards the minimum wage, the figures being £4.51 per day or £31.57 per week, the figure changes every year on 1st October.
People not entitled to the National Minimum Wage
Below is a list of people who are not entitled to be paid the NMW.
If you are self-employed you are not entitled to receive the NMW. If you believe you are a worker but your ‘employer’ says you are self-employed it is up to them to prove you are self-employed if there is a dispute about NMW which goes to an Employment Tribunal or civil court.
You are likely to be a volunteer if you do not have an employment or worker's contract (eg you are not a worker). It doesn’t matter who you volunteer for; it can be anyone, not just voluntary organisations.
Just because you are described as a volunteer does not necessarily mean that you are not entitled to the NMW. If the arrangements under which you ‘volunteer’ add up to an employment or worker's contract, you will be entitled to the NMW unless a specific exemption applies (eg the exemption for ‘voluntary workers’).
Voluntary workers are different to volunteers for NMW purposes. For NMW purposes, to be a voluntary worker you must have an employment contract or contract to perform work or provide services for a charity, voluntary organisation, associated fund raising body or statutory body. You should receive no more than limited expenses and benefits in kind and are not entitled to be paid the NMW.
If you are a student doing work experience as part of a higher or further education course you are not entitled to the NMW if the work experience doesn’t last longer than a year.
If you are an apprentice under the age of 19 you are not entitled to the NMW. If you are an apprentice aged 19 and over and you are still in the first year of your apprenticeship you are also not entitled to the NMW.
If you are a company director you are an ‘office holder’ in law. You are not entitled to receive the NMW for the work you do as an office holder. If you also have an employment contract or worker’s contract you will be entitled to the NMW for the work you do under that contract. If you are not sure whether this applies to you, you should seek independent legal advice.
Certain government schemes at pre-apprenticeship level
If you are taking part in one of the following schemes you are not entitled to the NMW:
• in England, Entry to Employment or Programme Led Apprenticeships
• in Scotland, Get Ready for Work
• in Northern Ireland, Access
• in Wales, Skillbuild
Government employment programmes
You may not be entitled to the NMW if you take part in a government employment programme which is meant to provide you with training or work experience, or to help you get or look for work. If you are going to take part in a scheme of this kind, check with the organisers to see whether you will be paid the NMW.
European Community Leonardo da Vinci, Youth in Action, Erasmus and Comenius programmes
If you take part in any of these programmes you are not entitled to receive the NMW for work done as part of them.
Living in your employer’s household
If you are a member of your employer’s family, live in their home and help run a family business or help with household chores, you are not entitled to the NMW if you share in the family’s tasks and activities.
If you are not a member of your employer’s family but you live in their home and share in the household’s work and leisure activities, for example if you are an au pair, you are not entitled to the NMW.
Work for friends and neighbours
If you do a job for a friend or neighbour under informal arrangements, with no contractual obligation, for example if you get a token payment for helping out with the shopping, you are not entitled to the NMW.
Members of the Armed Forces
If you are a member of the armed forces, you are not entitled to the NMW. This includes reservists and people who assist in the activities of the cadet forces (the Combined Cadet Force, Sea Cadet Corps, Army Cadet Force and Air Training Corps) as Cadet Force Adult Volunteers (CFAVs). Your entitlement to the NMW outside your activities as a reservist or CFAV is not affected.
If you are a share fishermen who receives part of the proceeds or profits from a catch instead of getting a fixed wage or salary, you are not entitled to receive the NMW.
If you are a prisoner working under prison rules, or someone detained under immigration laws and doing work in a removal centre under its rules, you are not entitled to the NMW.
People living in a religious or other community
If you are living in a religious or other community (apart from communities which are independent schools or provide further or higher education) you are not entitled to the NMW for any work you do for the community. For this to apply, a purpose of the community must be practising or advancing a religious or similar belief, some or all of its members must live together for that purpose and it must be a charity or established by a charity.
If you believe you are being underpaid you can see your employer’s National Minimum Wage records, or ask HM Revenue and Customs to investigate for you. You can contact the Pay and Work Rights Helpline for free, confidential advice.
How to address questions concerning your entitlement to NMW
Your employer must keep records that show he / she pays at least the national minimum wage to every employer entitled to it. If as a worker you are paid well above the minimum requirement, then it is likely that the standard payroll and other business records will be sufficient for this purpose.
Her Majesty’s Revenue and Customs (HMRC) compliance officers are entitled to ask any employer to produce their records for inspection. The employer is required to keep records relating to the NMW for at least 3 years. The HMRC advise employers to keep them for 6 years (5 years in Scotland) in order to show that the employer has paid at least national minimum wage rates if a civil claim is brought against them.
You should start by trying to make sure you have calculated your pay correctly. Most employees have the right to be given a written document setting out their rate of pay or how it is calculated. If you think you are not getting the National Minimum Wage (NMW), you can first of all try talking to your employer, who may have simply made a mistake.
If you realise you have not been paid at least the national minimum wage requirement, then your employer must work out and pay the arrears to you.
The employer must calculate any arrears using a formula that includes the current national minimum wage rate. This means that the employer may end up paying more than you would have if you had been paid the correct amount to start with.
Checking your employer’s NMW records
If you are still not satisfied after talking to your employer, you are entitled to be shown their pay records. You have to ask them in writing, and they have to produce the records within 14 days of your request, or at a date which you agree with them.
You can take someone else with you to inspect the records, as long as your written request says that someone will be coming with you. Who you take along is your choice – your employer has no say in this. You can copy the records if you want to.
What if you prefer not to approach your employer?
The role of HMRC is to enforce the national minimum wage. This is done by responding to complaints made about employers suspected of not paying the minimum wage, and by visiting a sample of employers about whom no complaints have been made, to check that all employers meet their obligations under the National Minimum Wage Act.
Pay and Work Rights Helpline
You can call the Pay and Work Rights Helpline and ask for help in claiming the NMW. The number to telephone is 0800 917 2368.
Your complaint can be investigated on your behalf and your employer could be ordered to pay you any back pay you are owed (‘arrears’). Since 6th April 2009, you are entitled to have any arrears paid at the current NMW rate, if it is higher than the rate in force when the arrears came about.
Claims to Employment Tribunals and civil courts
You can also complain to an Employment Tribunal if your employer will not let you see their pay records. If you win your case, the Employment Tribunal will order your employer to pay you an amount equal to 80 times the hourly rate of the NMW in force at the time they make the order. If you think you may want to take your own case, you may need to act quickly. You have just three months from the last time you were paid below NMW to make a claim to an Employment Tribunal.
Most people will have to raise a grievance with their employer before they can complain to a tribunal. Where an employee raises a grievance within three months, the timescales for making a claim can be extended to six months.
If your employer fails to pay you arrears, HMRC can bring a case to an Employment Tribunal or civil court on your behalf to recover the money. The role of HMRC is to enforce the national minimum wage. The HMRC do that by responding to complaints made about employers suspected of not paying the minimum wage, and by visiting a sample of employers about whom no complaints have been made, to check that all employers meet their obligations under the National Minimum Wage Act. The HMRC will issue a notice of underpayment. This will show the arrears you must be paid and also the penalty your employer must pay to HMRC.
The penalty is 50 per cent of the total underpayment that has occurred from 6th April 2009. This figure will be shown separately on the notice of underpayment. There is a minimum penalty of £100 and a maximum of £5,000. If your employer pays the arrears and the penalty within 14 days of the date on which the notice of underpayment is served, the employer only needs to pay half of the penalty.
Alternatively, you can bring your own case for unlawful deductions from wages, or a breach of contract through an Employment Tribunal (if your employment has ended) or through a civil court. When you start work your employer should tell you:
• the day or date when you'll be paid – for example, each Friday, or the last working day of the month
• how you will be paid, for example in cash, by cheque or directly to your bank
If you are an employee, you must be given a document which tells you how much you will be paid, and at what intervals, within 2 months of starting work. This is normally contained in your contract of employment.
If your employer dismisses you for particular reasons related to the NMW, the dismissal will be automatically unfair and you can complain to an Employment Tribunal. The reasons are:
• that you took, or said you would take, any action to get what is due to you under the National Minimum Wage Act
• that your employer was prosecuted as a result
• that you qualify, or will or might qualify, for the NMW
You can also complain to a Tribunal if you believe your employer is victimising you in some other way, short of dismissal, for those reasons.
Paying national minimum wage – further help
Help and advice for employees and employers on the rules of the National minimum wage. The HMRC also deal with complaints from workers who are being paid below the threshold.
As an employer if you need more help and advice about paying the national minimum wage, you can contact the Pay and Work Rights Helpline on Tel 0800 917 2368. The helpline is open from 8.00 am to 8.00 pm, Monday to Friday (excluding bank holidays) and 9.00 am to 1.00 pm on Saturdays.
For customers who are deaf or hearing or speech impaired: 0800 121 4042 (Textphone)
Alternatively visit the website at: http://www.hmrc.gov.uk/nmw/complaint.htm
Another helpful website is through business link, where a general enquiry can be made online: www.businesslink.gov.uk/payandworkrights
With advice or to find out more about other protection at work check www.businesslink.gov.uk/employment
For Advice about Employment Tribunals or assistance with your employer phone ACAS on 08457 47 47 47.
The above article is meant to be relied upon as an informative article and in no way constitutes legal advice. For legal advice regarding your case, please contact Cartwright Adams on +4420 7887 7550 for a Consultation with a Solicitor.