Minimum Wage

The National Minimum Wage is an hourly rate. It is determined by the number of hours which the worker works.The national minimum wage is payable to workers who work in the United Kingdom.

Formerly, there were separate agricultural minimum wages which has recently been abolished in respect of England.

The National minimum wage rates as of April 2018  for adults over 25 years of age is £7.83 per hour. This is now referred to as the National Living Wage. There are lower national minimum wage rates for persons under this age.

£7.38 for those aged 21–24,

£5.90 for ages 18–20

£4.20 for under 18.

The vast majority of adult workers in the UK are entitled to the minimum wage.  There are exemptions for part-time casual workers and agency workers, individuals who are genuinely self-employed, certain voluntary workers and workers based permanently outside of the UK.

There are special methods for calculating the National minimum wage for particular types of workers in more unusual circumstances e.g. in the case of the workers who are paid per piece of work.  The minimum wage is based on a fair piece rate which allows the average worker to receive the minimum wage.  In the case of workers who provide certain tasks, but without any specific hours or periods, a daily average of the realistic daily numbers of hours is computed.

Persons Entitled

Broadly the same definition of a worker applies, as in other employment protection contexts. They include persons employed under contracts of employment and others who work under a contract to perform personally work services for another party to the contract. This does not apply to services supplied by a professional undertaking carried on by the individual.

Certain categories of voluntary workers do not qualify for the national minimum wage. They must be employed by a charity voluntary organisation or other such body. Other conditions apply including in particular that they are to receive only expenses actually incurred or estimated to be incurred.

A resident member of a religious community does not qualify for the national minimum wage in respect of employment by that community.

Workers who reside in the family home  are members of the employer’s family and are treated as such are excluded. They should be provided with accommodation meals and the work should be shared tasks. The person must be genuinely a member of the family unit rather than a domestic worker as such.


The worker is to be treated as remunerated by the employer in a pay reference period at the hourly rate calculated in accordance with the statutory formula. Essentially it provides that the remuneration in the pay reference period is multiplied by the number of hours in the pay reference period.

The pay reference period is one month on the case of workers paid by reference to a shorter period e.g. one week) that shorter period.

Remuneration includes

  • payments by the employer to the worker in the pay reference period (unless preferable to another period)
  • payments by the employer to the worker in the following pay reference period in respect of the relevant pay reference period.

Payment by the employer to the worker may be deferred until later than the end of the following pay reference period where

  • the worker is under an obligation to complete a record of work done;
  • where the payment obligations not arise until the work record is submitted,
  • the worker has failed to submit the record before the fourth working day before the end of the following reference period and
  • the payment is paid for the pay reference period in which the record is submitted.

There are special rules in respect of the final pay reference period in certain circumstances which take account of benefits received and offset

Benefits in Kind Not Pay

There are a number of benefits in kind which are not part of total remuneration for the purpose of the national minimum wage

  • advances under a loan
  • advance of wages
  • pension payment in connection with retirement or loss of office
  • award of a court / tribunal in respect of matters other than amounts due under the employment contract
  • redundancy payments
  • benefits in kind not whether or not having monetary value other than the living accommodation
  • voucher stamps similar documents capable of being exchanged for money
  • reimbursement of expenditure in connection with employment
  • payment by the employer representing amounts paid by customers by way of service charge, tip
  • gratuity or cover charge
  • travelling expenses
  • payments in respect of hours that are not hours of work


The hours worked depend on the nature of the work concerned. Salaried work is based on an annual salary in equal instalments which require a basic number of hours per year. Time work for pay is based on the number of hours spent working not on annual salary. Output work is work is paid in accordance with a measure of output. Unmeasured wor; is work not falling into the above categories.

In respect of each category, there are also rules in respect of industrial action training travelling time.

In the case of salaried hours works rules are published in the NMW IDS handbook

In the case of time work the total number of hours in the reference period are added

In the case of output work the number of hours spent producing the output are added subject to averaging and other specific rules.

In the case of unmeasured work, the actual hours work is determined subject to averaging and other specific rules


An employer is obliged to keep records to prove compliance with the National minimum wage requirements. The burden is on the employer to prove compliance.  Records must include details of gross payments, payments for overtime and absences.  It is a criminal offence to refuse to pay an NMW or fail to keep records or to falsify records.

Failure to pay the national minimum wage may be enforced by way of a claim in the Employment Tribunal. The claim can be made in an employment tribunal deduction claim.This can be combined with other claims such as unfair dismissal. It may be pursued by way of civil claim in the County Court. The may be a prosecution for failure to pay the national minimum wage.

The employee can require to see the requisite records which the employer must keep. If the employer refuses the employee access, the tribunal can tribunal may award a sum equal to 80 times the national minimum wage rate


HMRC have power to enter premises in respect records. They may take records and copies of records. HMRC have power to issue notice of underpayment. This requires payment of arrears Employers who fail to pay the national minimum wage can be have their names published under so-called name and shame legislation. Failure to pay the national minimum wage is subject on conviction to an unlimited fine.

If workers are paid well above the National minimum wage, the pay records for PAYE and National insurance should suffice.  If workers work a significant amount of hours during their pay period, it is necessary to ensure and prove by records that the National minimum wage requirement is complied with.

HMRC is responsible for enforcing the National minimum wage. Workers can request their pay records at any time.  HMRC have powers to police compliance with the NMW and may visit and take appropriate records. They may serve an enforcement notice if there is a failure to comply.  Failure to comply with the enforcement notice leads to a penalty of double the amount of the NMW.

Guarantee Pay

Employees who are employed for certain kind of works may be entitled to fall back or guarantee pay if they are not in fact required due to some unexpected circumstance.  There is an entitlement to guarantee payment up to a maximum of 5 days in any three month period.  It is based on the normal working hours times the guarantee hourly rate, subject to an upper limit for any one day.

The right to guarantee pay may arise where the employee he is not provided with work on a particular day. It applies where he is normally required to work on that day in accordance with his contract and work is not provided by reason of

  • a diminution in the requirements of the employer’s business for work of the kind for which he is employed or
  • any other occurrence affecting normal working of the employer’s business in relation to that work occurs.

The right does not apply

  • where the employee has not been employed continuously for one month before the relevant day,
  • where the failure is due to a strike lockout or industrial action (regardless of whether he is taking(part)
  • where suitable alternative work is offered
  • where he does not comply with reasonable requirements.

Payroll Deduction

Deductions from pay must be made in accordance with certain conditions.  They should be allowed in the contract of employment.  There are certain circumstances where deductions can be made without consent, but they are strictly limited.

Certain deductions must be made by law.  These include PAYE and National Insurance Contributions.  There are other deductions that may be required such as deductions required under a Court Order to enforce payment of a debt.

Important Notice; see the Terms of Use and Disclaimer below

Legal Guide Limited, UK Law (An Irish Overview), and Paul McMahon have no liability arising from reliance on anything contained in this article or on this website

Share this article:

Leave a Reply