What is the National Minimum Wage?
Under UK law, employees and ‘workers’ are entitled to certain rights, including a minimum wage. We explain what the current National Minimum Wage (NMW) is and what you should do if you do not receive it.
From 1 April 2016 there is also a National Living Wage (NLW), which we explain below.
What are the National Minimum Wage (NMW) and National Living Wage (NLW)?
The UK law gives protection to employees and sometimes 'workers' (see below), and gives them the right to things like holidays, holiday pay, a healthy and safe workplace, freedom from discrimination, and a minimum wage.
The NMW guarantees that you will receive at least that amount of pay per hour. The NMW is an hourly rate set by the Department for Business Innovation and Skills and monitored by HM Revenue & Customs (HMRC).
The National Living Wage (NLW) was introduced from 1 April 2016 and is essentially a premium on top of the NMW for workers aged over 25 who are not in the first year of their apprenticeship. If you are eligible, it guarantees that you will receive at least that amount of pay per hour. The NLW is an hourly rate set by the Government and monitored by HMRC.
What are the current rates?
|From 1 April 2017||From 1 April 2018|
|£ per hour||£ per house|
|Age 25 and over (National Living Wage)||£7.50||£7.83|
|Age 21 to 24||£7.05||£7.38|
|Age 18 to 24||£5.60||£5.90|
|Age 16 to 17||£4.05||£4.20|
|Apprentice rate – payable to all apprentices under the age of 19 and to any apprentice in the first year of their apprenticeship, regardless of age||£3.50||£3.70|
The government has aligned the dates on which both the National Minimum Wage and National Living Wage cycles change so that both rates are amended into April in each year. This took effect from April 2017.
The NMW rules are straightforward where you are paid on an hourly basis for a set number of hours each week or month. The rules are more complex where you are paid per task you perform or piece of work you do (known as ‘piece work’). You must be paid either at least the NMW for every hour worked or on the basis of a ‘fair rate’ for each task or piece of work you do.
Read more about how to work out the NMW using this system on the GOV.UK website .
I’ve just had a birthday and I’m entitled to a higher rate, when should the new rate apply?
The rules say that any new rate (i.e. for those turning 18, 21 or 25) starts from the beginning of the next pay period. People naturally think that if they are monthly paid and turn 25 (say) on the 15th August, then they should be paid the higher rate for the rest of the month. But actually, they are only entitled to it from the beginning of the following pay period i.e. 1st September.
These same rules apply to apprentices – ie. for those turning 19 and/or for those moving into the second year of their apprenticeship
Can I ever receive less than the NMW or the NLW?
Your employer cannot pay you less than the NMW, or the NLW if you are entitled to it, even if you are willing to accept it.
In particular you should note that employers must pay their employees at least the NMW or NLW as appropriate regardless of any additional tips, gratuities or service charges they may obtain as part of their job. (Workers entitled to the NMW/NLW must get at least the NMW/NLW in base pay with any tips being paid on top.)
Additionally, your employer cannot make deductions from your pay in respect of items or expenses that they have provided that are necessary for your employment (such as for a uniform or protective clothes) as these cannot bring down the pay rate below the NMW or NLW.
If your employer provides you with accommodation, they can count some of its value towards NMW or NLW pay. Your employer cannot count more than the accommodation offset rate which is in force at any given time.
The maximum offset rate for accommodation charges is £7.00 a day or £49.00 a week. If an employer charges more than this, the difference is taken off your pay which counts towards the NMW or NLW.
Worker A, who is 23 years old, is paid £8 an hour for 40 hours work (£320 per week). But he stays in the employer’s accommodation and the employer charges him £90 per week for his bed and board. Under the accommodation offset rules, the employer is allowed to consider £49 per week as pay for NMW purposes. So whilst Worker A actually only receives £230 (320-90), he is deemed to receive £279 (230 + 49). However, the deemed amount of wages is less than the NMW for his 40 hours work, as it only amounts to £6.98 an hour.
NMW and NLW
Almost all employees and ‘workers’ over school leaving age in the UK are entitled to receive the NMW – this includes full and part-time employees, agency workers, migrant workers and casual workers.
A ‘worker’ is someone who basically undertakes to do or perform personally any work or services for another person. Their work arrangements tend to be 'midway' between self-employment and employment. They have some characteristics of both in that they are formally self-employed but they depend on a single employer for their income (or a large part of it). You can find a checklist that defines who a worker is for NMW purposes on the GOV.UK website.
What is a worker – an example
A carpenter who works exclusively for one firm of building contractors will likely be a ‘worker’ even though he may decide his own hours and own way of working, complete his own tax returns, pay his own tax and National Insurance and provide his own tools. He is a ‘worker’ because the building firm has hired him personally to do the work and it would not be acceptable for him to send a sub-contractor or a friend in his place – even though he is otherwise quite independent of the building firm.
If they also set his hours and work tasks each week with specific holidays and wages, he may well be an employee.
Alternatively, if he had many clients and was only asked to do a one – off job for the building firm, he would probably be self-employed.
You should note that if you are self-employed for tax purposes you may still be entitled to the NMW if you have to do the work yourself and cannot send someone else to do it for you, as this would mean that you fall in the definition of a ‘worker’ for NMW purposes.
If you are self-employed for tax purposes and are able to not turn up and not do the work yourself (you can send someone else to do the work for you), then you will probably not be covered by the NMW legislation.
What are some problem areas
In addition to tips, deductions and accommodation, there are other complex minimum wage areas to be aware of (some unscrupulous employers may try and use them to their advantage). We look at some of them here:
Where workers undergo training (for example – employment induction or skills development) the time spent on such activities is working time for minimum wage purposes where a contract of employment has started or where it is a contractual requirement for the worker to attend the training.
However, where prospective workers attend pre-employment induction events to assess their suitability for employment or as part of the job application process, then this would not count and is exempt from the minimum wage rules. You can see what other things count as working time on GOV.UK.
Travel time and costs
Whilst it is not a requirement under minimum wage law for an employer to make separate payments to workers for their travel, workers should be paid at least the NMW/NLW rate for all hours worked, including travel time and out of pocket expenses such as vehicle mileage (‘travel’ means travel in connection with work but not travel from home to place of work).
Wali is 35 and is paid weekly. Last week she was paid £8 per hour for 30 hours work (£240). However Wali spent 3 unpaid hours that week travelling to a business meeting, so the minimum amount to be paid to her should be £7.83 x 33 hours - £258.39. Wali has been paid below the NLW. Her employer needs to top up her pay by at least £18.39 so that the NLW rules are met.
If Wali also incurred £20 of travel costs for those three hours of travelling, her pay would be taken to be £220. When we compare this to the bare minimum she should have received, £258.39, she has been underpaid by £38.39.
It is important that care workers in particular, who are often required to travel extensively to visit people in their own homes, try and understand the travel time rules to make sure they are being applied correctly. There are some useful examples looking at care workers and travel time on GOV.UK.
Any intern who has a contractual relationship with his employer must be paid at least minimum wage for the hours they have worked. Having set hours, an obligation to fulfil those hours and complete tasks, and individual responsibility for work are all aspects that will be taken into consideration. If an intern is a ‘volunteer’ they will be exempt from NMW/NLW. Volunteers are people who are under no obligation to perform work or carry out instructions. They have no contract or formal arrangement and so can come and go as they please
If you are an intern, you may find it useful to read the GOV.UK guidance on the NMW for organisations who offer work experience, including placements and internships.
Premium rates of pay
The principle of the minimum wage rules is that a worker’s basic minimum wage pay, before enhancements or other allowances should not fall below the NMW/NLW.
This means that if you are paid at a higher rate than your standard pay rate for some of the work you do – for example for working on weekends or bank holidays, the premium element of pay – that is, the amount the higher pay rate exceeds your basic rate – does not count towards minimum wage pay.
Example: Carry (aged 19) is paid weekly. Last week she was paid £195 for 31 hours work, which averages £6.29 an hour. On the face of it, £6.29 per hour looks like it meets the applicable minimum wage (£5.55), but actually, 8 of the hours were paid at £10 for a Sunday shift.
If we strip out the ‘premium’ amount she received for her Sunday shift, Carry’s basic rate works actually works out at £5 which is below the minimum wage.
There is a comprehensive employer guide to calculating the NMW and NLW produced by the Department of Business, Energy and Industrial Strategy that you may find helpful as it covers other complex topics like salaried workers and sleeping in time. Although it is aimed at employers, employees may find it useful too when trying to understand the rules and self-check their position.
What should I do if I do not receive the NMW or the NLW?
If you think you are not getting the NMW or NLW, you should talk to your employer. If that does not work, you can also contact a confidential helpline (Acas Pay and Work Rights Helpline) to help you solve any dispute. You can find the telephone number on GOV.UK.
If there is a dispute and HMRC decide that the employer has not paid the NMW, the employer will be sent a notice for the arrears and may also be given a penalty.
The arrears will be repaid to you at current rates for all the periods they were underpaid, even if these are higher than the rate that applied when the arrears arose. This is in recognition of loss of purchase power you may have suffered from the initial underpayment.
You can find out more on what to do if your employer refuses payment on GOV.UK.
Where can I get more help?
You can get more help by contacting the Acas Helpline for help in the following employment areas:
- the NMW/NLW
- working in agriculture
- using employment agencies
- working time limits
- using a gangmaster
There is more information on our National Minimum Wages factsheet.