Don’t get caught out by the National Minimum Wage

National Minimum Wage 2018

After a number of employers were recently ‘named and shamed’ for underpaying their minimum wage workers, we highlight some of the main rules.

Last month, 179 employers were named for not paying the National Minimum Wage (NMW) to 9,200 workers. The total underpayment was £1.1 million. The biggest offenders were employers in the hospitality and retail sectors.

What are the key rules regarding the NMW?

  • On 1 April 2018 the NMW rates increased as follows:

NMW Graph

  • NMW is based on a worker’s average hourly rate over the relevant ‘pay reference period’. This is one month, or a shorter period if the worker is paid by reference to that shorter period. For example, for a weekly paid worker, the pay reference period is one week.All employers are obliged to pay the NMW, regardless of their size.
  • Pay elements which count towards NMW include basic salary, and bonus and commission which relate solely to the worker’s performance.
  • Pay elements which do not count towards NMW include loans, pension payments, premiums paid for overtime or shift work, and benefits in kind (although there are special rules where an employer provides accommodation to a worker).
  • Time which a worker spends ‘on call’ may count towards the NMW. This depends on whether they are classed as ‘working’ during that time, rather than just being ‘available’ for work.
  • Employers must keep certain records to show workers have received the NMW.
  • As well as being ‘named and shamed’, an employer who does not pay the NMW risks being issued with a notice of underpayment by HMRC. This will include a demand for the pay arrears due, plus a financial penalty of up to 200% of the arrears owed.
  • In very serious cases, criminal charges can be brought against offending employers.
  • Workers who do not get paid the NMW can bring claims for breach of contract or unlawful deduction from wages.

The Low Pay Commission (the independent body that advises the Government on the level of the NMW) has recently opened a consultation. The Commission is seeking views on the minimum wage rates which should apply from April 2019.

Following the recent recommendations made in the Taylor Review, the Commission is also seeking views on whether to introduce a higher minimum wage for those hours that are not 'guaranteed' by an individual’s contract. Separately, the Commission is also conducting a review of the minimum wage structure, looking at a review of the youth rates and apprentice rates. The consultation will close on 1 June 2018.

Jonathan Royle, Employment Senior Associate

Jonathan Royle

Senior Associate