National Minimum Wage

The National Minimum Wage came into effect on 1 April 1999. It covers all workers employed under a contract, including part-time, contract and home workers, except those genuinely self-employed. Voluntary workers are also excluded.

A minimum wage for 16 and 17 year olds was introduced from 1 October 2004

From 1 October 2010 the adult rate was extended to 21 year olds and a minimum rate for apprentices was set.

Recent rates are:

  21 year olds and above 18 to 20 year olds 16 and 17 year olds Apprentices *
From 1 Oct 2010 £5.93 per hour £4.92 per hour £3.64 per hour £2.50 per hour
From 1 Oct 2011 £6.08 per hour £4.98 per hour £3.68 per hour £2.60 per hour

 * Note that apprentices include those under 19 years and those aged 19 and over that are in the first year of their apprenticeship.

The employer must keep records for each employee and if a dispute arises the burden is on the employer to prove the wage has been paid.

 

The Minimum wage applies to gross earnings and is calculated before deducting tax, NICs etc.

 

‘Pay’ is defined in the National Minimum Wage Regulations 1999. It includes:

usual basic wage/salary

variable elements such as incentive payments

profit related pay

 

The definition excludes such payments as increases for overtime and shifts, cash tips direct to worker and benefits in kind (except living accommodation)

 

It is necessary to refer to the Regulations to determine the method of calculating the hourly rate payable in any pay period.

 

A complicated set of definitions is included to ensure that salaried workers, hourly-rate paid workers and piece-workers are all covered by the Regulations.

 

Employees can claim unfair dismissal if dismissed because they became entitled to the minimum wage.

 

The Employment Act 2008 came into force on 6 April 2009 and introduced measures to toughen up penalties on rogue employers who fail to pay the NMW and provide a fairer method for dealing with NMW arrears. There is more information available on www.businesslink.gov.uk/minimumwage  and a calculating tool at www.businesslink.gov.uk/minimumwagecalculator

 

 

All PBS Information sheets and designed to provide the detail you need to implement best business and employment practices. They are not a detailed commentary on the current law and where advice is needed in a specific case you should contract PBS for expert consultation

 

NMW