The National Minimum Wage (NMW) was introduced on 1 April 1999.  HM Revenue & Customs is the agency that ensures enforcement of the NMW.

We highlight below the main principles of the minimum wage regulations.

Please contact us for further specific advice.

WHAT IS THE NATIONAL MINIMUM WAGE FROM 1 OCTOBER 2008?

The current standard rate of the NMW for workers aged 22 and over is £5.73 per hour. 

The current rate for employees between 18 and 21 years old is £4.77 per hour.  

The current rate for employees aged 16 and 17 years is £3.53 per hour. 

the rate changes on 1 October each year.

There are no exemptions from paying the NMW on the grounds of the size of the business.

KEY QUESTIONS

Who does not have to be paid the National Minimum Wage?

• Apprentices under age 19
• Apprentices over age 19 and in the first 12 months of their apprenticeship
• Volunteers.
• The genuinely self-employed.
• People such as au pairs who live and work as part of a family.
• Family members who live at home and participate in a family business.

Please note in relation to the last point that the Revenue have the power to serve an enforcement notice requiring the payment of at least the NMW, including arrears, to all family members working for a limited company.

What is taken into account in deciding whether the NMW has been paid?

The amounts to be compared with the NMW include basic pay, incentives, bonuses and performance related pay and also the value of any accommodation provided with the job.

Overtime, shift premiums and regional allowances are not to be taken into account and benefits other than accommodation are also excluded.

What records are needed to demonstrate compliance?

There is no precise requirement but the records must be able to show that the rules have been complied with if either the Revenue or an Employment Tribunal requests this to be demonstrated. Where levels of pay are significantly above the level of the NMW, special records are not likely to be necessary.

It is recommended that the relevant records be kept for at least six years.

Normally there is not likely to be any serious difficulty in demonstrating compliance where employees are paid at hourly, weekly, monthly or annual rates but there may be difficulties where workers are paid on piece-rates and where, for example, they work as home-workers.

In such cases it will be necessary for employers to have written agreements stating fair (meaning realistic) estimates of the number of hours that will need to be worked to achieve certain output and this agreement should demonstrate compliance with the rate.

What rights do workers have?

Workers are allowed to see their own pay records and can complain to an Employment Tribunal if not able to do so.

They can also complain to the Revenue or to a tribunal if they have not been paid the NMW.

What are the penalties for non-compliance?

Enforcement notices can be issued if underpayments are discovered and there can be a fine of £7.40 per worker per day if enforcement notices are not complied with.  The penalties regime is changing from 6 April 2009.

There could also be a maximum fine of £5,000 for having committed a criminal offence.

HOW WE CAN HELP

We will be more than happy to provide you with assistance or any additional information required.