Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Minimum wageLegal opinion

Complying with the national minimum wage: key pitfalls to avoid

by Erica Humphrey 25 Feb 2014
by Erica Humphrey 25 Feb 2014

In January 2014, the Government announced its intentions to crack down on rogue employers that do not comply with national minimum wage obligations. Erica Humphrey of IBB Solicitors highlights some tricky areas where even employers that are trying to be responsible can come unstuck.

Fines for an employer that is found not to have paid the national minimum wage are set to increase from 50% to up to 100% of the unpaid wages, and the upper limit will quadruple from £5,000 to £20,000. The exact date for the increase is not yet known, but it is expected to come into force soon. However, employers do not just face the prospect of financial penalties.

The Government already has an armoury of other weapons to deter non-compliance. The “name and shame” scheme provides a publicly available list of non-compliant employers, which can have damning reputational consequences. At worst, directors or managers can face criminal conviction. With the national minimum wage firmly in the spotlight, it is more important than ever for employers to fully understand their obligations. The following are just a few issues of which employers should be mindful.

Employer pension contributions

Auto-enrolment has already kicked in for some employers, and will be just round the corner for others. So, can the employer’s pension contribution be included within the employee’s wage calculation for the purpose of complying with the national minimum wage?

In short, the answer is no – so for those employers that pay only the national minimum wage, employee overheads will increase when auto-enrolment kicks in.

Benefits in kind

Generally speaking, the value of benefits in kind cannot be taken into account when calculating an employee’s total earnings. The rationale behind this policy is to ensure that workers receive money for the work they have done, rather than receiving the entirety of their pay in alternative benefits in kind. The only exception to this is where an employer provides accommodation.

Accommodation allowances

Where accommodation is provided free of charge to an employee, employers can apply a fixed amount (£4.91 per day or £34.37 per week in 2013/14) onto the worker’s total gross pay for the purpose of calculating their total earnings. If an employer charges rent that is greater than £4.91 per day, the excess is taken into account for the purpose of calculating whether or not the worker is in receipt of the national minimum wage. Effectively, the higher the rental charge, the lower a worker’s pay will be when calculating national minimum wage.

Bonuses and commission

Any bonus, commission or other incentive payment based on performance can be included for calculating the national minimum wage.

In order to count towards the total earnings calculation, the payment has to be made for rewarding good performance. Therefore, payments such as tips and gratuities cannot be taken into account because these are discretionary payments. Similarly, premium payments for overtime or shift work cannot be taken into account.

Working time

The calculation of the national minimum wage is of course intrinsically linked with the number of hours that the worker is deemed to have “worked”.

More from XpertHR

Reviewing pay rates against the national minimum wage

A big problem area for employers is determining what constitutes “working time”. This is particularly problematic in certain sectors, such as care work and the leisure industry. It is not unusual for certain workers in those sectors to do overnight shift work where they may be entitled to breaks to sleep while remaining on duty – generally speaking, this is likely to count as working time.

Workers may also be “on call” for periods of time, albeit during which they may not be called upon and can be at home for the whole “on call” period. This might be included in working time, particularly if the worker is at or near a place of work and is required to be available for such work.

Employers should be alert to the fact that calculating working time is complex. Where employers have workers doing atypical work, they should seek legal advice to avoid falling foul of their national minimum wage obligations.

Demonstrating compliance

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

OptOut
This field is for validation purposes and should be left unchanged.

Employers are responsible for demonstrating that they have complied with their obligations – this makes accurate record-keeping an absolute priority. As a minimum, an employer should keep records of its pay and deductions to show that it has complied with the national minimum wage. Employers may enter into agreements with their workers as to how pay is calculated, especially in industries where pay calculations may be complicated. Those agreements should be retained, together with any relevant correspondence or other associated documentation.

Rates for the national minimum wage change annually and different rates apply for different workers, depending on their age and sometimes the work that they do. Employers should keep abreast of changes so that they can be implemented in the workplace as soon as they come into effect.

Erica Humphrey

Erica Humphrey is a solicitor at IBB Solicitors.

previous post
Why current gender diversity practice is part of the problem
next post
Under surveillance: an extract from Contemporary Occupational Health Nursing

You may also like

Fire and rehire: the relocation question

22 May 2025

Next to improve wage-setting transparency after shareholder pressure

16 May 2025

Top 10 HR questions April 2025: increases to...

2 May 2025

Opposition to Supreme Court sex ruling is ‘wishful...

22 Apr 2025

Working when the clocks go forward: how should...

30 Mar 2025

Most businesses will need to adjust wages in...

28 Mar 2025

April 2025: What’s coming up for HR?

21 Mar 2025

The future of apprenticeships: Why higher wages are...

14 Feb 2025

Higgs’ victory has ‘profound’ implications for employers

12 Feb 2025

McDonald’s: zero hours culture feeds sexual harassment allegations

10 Feb 2025

  • 2025 Employee Communications Report PROMOTED | HR and leadership...Read more
  • The Majority of Employees Have Their Eyes on Their Next Move PROMOTED | A staggering 65%...Read more
  • Prioritising performance management: Strategies for success (webinar) WEBINAR | In today’s fast-paced...Read more
  • Self-Leadership: The Key to Successful Organisations PROMOTED | Eletive is helping businesses...Read more
  • Retaining Female Talent: Four Ways to Reduce Workplace Drop Out PROMOTED | International Women’s Day...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2025

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2025 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+