The National Minimum Wage Act 1998 gives workers the right to a specified minimum hourly rate of pay. The latest increase took effect from 1 April.
| Year | 25 and over | 21 to 24 | 18 to 20 | Under 18 | Apprentice |
|---|---|---|---|---|---|
| April 2019 | £8.21 | £7.70 | £6.15 | £4.35 | £3.90 |
National Living Wage vs National Minimum Wage
- National Living Wage is for workers aged 25 and over.
- National Minimum Wage is for workers of school-leaving age up to the age of 24.
- Employers are legally obliged to pay the Government’s National Living Wage (NLW).
Don’t confuse it with the Living Wage, which is set independently and calculated on the basic cost of living in the UK – employers can choose to pay it if they wish.
Contracts for payments below the minimum wage are not legally binding. It is a criminal offence for employers not to pay the minimum wage to those entitled to it or to falsify payment records. It is the duty of the employer to ensure the correct rate is paid.
Employers who discover they have paid a worker less must pay any arrears immediately.
1. How are they calculated?
To calculate whether an individual is paid the relevant minimum wage for their age, the average hourly rate must be calculated. The average hourly rate is the total pay earned over the relevant pay reference period divided by the total number of hours worked during that period. An employee who is paid weekly will have a pay reference period of one week; an employee paid monthly will have a pay reference period of one month.
2. What counts as ‘pay’?
To calculate the average hourly rate, the employee’s total gross pay plus benefits are included.
Benefits include any payments made on top of basic salary, such as bonuses, commissions and other incentive payments. Any premium on overtime cannot be included in the calculation.
Accommodation allowance can be included in the calculations. This is a daily rate which can be added to a worker’s salary for the purpose of calculating NMW/NLW for every day that the employee is provided with accommodation by the employer. This rate is £7.55 per day from April 2019. This is the maximum amount – the most an employer can offset per week is £52.85. Other benefits in kind cannot, however, be taken into account.
Certain deductions, most importantly income tax and national insurance, will not affect the calculation.
3. What is working time?
To calculate the relevant minimum wage, it is necessary to calculate the number of hours the worker has actually worked. Working time includes not only time spent working but also any time during which the worker may be obliged to be available for work. Time spent travelling (excluding commuting) and training time will also count as working time.
4. What are the risk areas?
Many nurseries require staff to attend work on an evening or weekends to carry out training. Under the Working Time Regulations, work-related training is counted as part of the working week.
If employees attend training, you need to calculate their average hourly rate worked during the pay reference period to ensure they are not paid below the NMW/NLW. This also applies if staff attend parent or staff meetings or open days outside normal working hours.
5. Who can bring a claim for failure to pay the NMW/NLW?
A worker can bring a claim in an employment tribunal for unlawful deduction from wages which takes their pay below the relevant minimum wage. Such claims must be brought within three months of the date of the deduction or from the last in a series of deductions.
If the employer cannot prove that the relevant minimum wage has been paid, it will be assumed it has not been. Pay records for staff should be maintained throughout the employment relationship, and for at least three years from the date of termination.
A worker can make a complaint to HMRC, which will investigate. This can be done anonymously. HMRC can send a notice of arrears plus a penalty. The maximum fine is currently £20,000 per worker.
Employers can also be named publicly for not paying NMW/NLW and banned from being a company director for 15 years.
HMRC can also carry out random inspections and require employers to prove the NMW/NLW is being paid.
6. What do I need to do as a nursery owner?
Review all contracts and pay arrangements for all lower-paid staff annually to ensure the NMW/NLW is being paid. Check apprentice wages after their first year has been completed – this is an area that is often forgotten.
The annual increase is always in April. Review contracts and pay in March ready to implement pay increases for the April payroll.
Jacqui Mann is founder of JM Associates, www.jmassociates.org
