The National Minimum Wage (NMW) is a cornerstone of UK Government strategy, aimed at providing employees with decent minimum pay standards and fairness in the workplace. It applies to nearly all workers throughout the United Kingdom, although there are different minimum thresholds for different age groups.
Employers must ensure that their employees’ wages do not fall below the mandatory minimum hourly rate. The rates set are based on the recommendations of the independent Low Pay Commission.
An employer is responsible for keeping accounting records that provide evidence that the correct payments are being made. Payroll records usually are sufficient. Records must be kept for a minimum of 3 years.
Terms in an employment contract that set the wage below the minimum legal limit are deemed to be invalid. However, the worker is still entitled to the statutory minimum.
HM Revenue and Customs (HMRC) monitor whether employers make payments correctly. Employers who do not pay the minimum rate, or who falsify payment records commit a criminal offence. HMRC can fine a business for not paying, and request that arrears are paid immediately. If the employer refuses, then HMRC can issue proceedings in court.
Employees who believe that they have been underpaid should first raise the issue with the employer. They can ask the employer to show payment records to prove that the correct amount has been paid. They can also ask someone else to be present, and make copies of the records.
If accidentally an employer underpaid an employee, he or she must pay the arrears immediately.
If the employer refuses, the employee can take the employer to an employment tribunal.
Most workers are entitled to receive at least the NMW. Whether employment is full-time, part-time, or on a casual (zero hours) basis makes no difference to the employee’s rights (similar to entitlements for being paid for holiday leave). Agency workers, trainees, and piecework workers also have the same rights.
Workers must be at least school leaving age to receive the NMW. Only workers over 25 years of age can receive the National Living Wage.
Apprentices under 19 years old, or in the first year of the apprenticeship should receive at least a reduced apprentice rate. Apprentices over 19 and who have completed at least one year of their apprenticeship are entitled to the relevant rate for their age.
The NMW does not apply to:
- people who are genuinely self-employed
- company directors
- volunteers and voluntary workers
- workers on government employment programmes such as the Work Programme, a Jobcentre Plus Work trial, or pre-apprenticeships schemes
- members of the armed forces
- family members of the employer living in the employer’s home
- au pairs
- workers younger than school leaving age
- higher and further education students on a work experience or work shadowing placement of up to 1 year
- people working whilst on the Leonardo da Vinci, Youth in Action, Erasmus or Comenius programmes
- share fishermen
- people who have chosen to live and work within a religious community
The minimum wage payable excludes items bought by the employee in order to carry out the job, such as uniforms.
However, valid deductions include:
- income tax and national insurance contributions
- wage advances or loans, repayment of these, or repayment of overpaid wages
- voluntary payments by the employer
- accommodation provided by the employer above the offset rate
- penalty charges