My Employment Rights

Scope and rates

The NMW, in the main, applies to all workers aged 18 and over. The principal categories of workerincluded are: (i) workers who work under a contract of employment, including temporary workers, casual and seasonal workers; and (ii) workers who work under a contract for services to provide the work or services personally, including temporary workers, agency workers, casual and seasonal workers (this covers self-employed freelancers not in business on their own account, working exclusively for the employer, who do not have the freedom to select another employer to whom to provide a service).

A number of categories of worker are specifically excluded from receiving the NMW, eg voluntary workers for charities and similar organisations who only get expenses; people on various government training, work experience or temporary work schemes; people doing work experience of not more than a year as part of a higher education course; people under the age of 26 on recognised or modern apprenticeships, those in the first year of their apprenticeship; and any apprentice under age 19 in whatever year of apprenticeship; etc.

There are a number of different rates: (i) the full rate for those aged 22 and over who qualify for the NMW; (ii) the development rate for 18- to 21-year-olds; (iii) a "trainee rate", for workers aged 22 or over who are starting a new job with a new employer and receiving accredited training during the first six months of that job; and (iv) a lower rate for those under age 18 who have ceased to be of compulsory school age. For details of the current NMW rates, see "Statutory Pay Rates" in the "Facts and Figures" section.

The trainee rate only applies if all of the following three conditions are satisfied: (i) the worker is starting with a new employer; (ii) the individual is receiving accredited training under an agreement with the employer; (iii) the worker is taking part in training on at least 26 days in the first six months in the job.

Work covered

The Regulations seek to cover all working arrangements and does so by providing four different categories: "time work"; "output work"; "unmeasured work" and "salaried hours work". Employers must place workers in the relevant category.

Category 1 - "Time work": these are workers who are employed and paid wholly on a time basis and are not paid an annual salary. They work a certain number of hours which may or may not vary, for which they receive certain payments (this definition includes those who are employed partly on a time basis and partly on a piecework/commission basis).

Category 2 "Output work": these workers are employed and paid wholly on a piecework or commission basis, eg according to the number of products made or the number, or value, of sales made.

Category 3 "Unmeasured work": these workers are not time-based, nor do they carry out piecework or commission work, for example, workers who live on the premises and/or who need to be available 24 hours a day (such as care workers, youth hostel wardens, some pub managers). These workers may have a set of tasks to be done but when they are done varies according to circumstances.

Category 4 "Salaried hours work": these workers are paid an annual salary for a set basic number of minimum hours in a year and are paid in equal instalments, eg 12 times - monthly, 13 times - every four weeks, 52 times - weekly payments, etc.

As the NMW is an hourly rate, the rules for working out the number of hours to be used in the calculation are key in deciding whether the requirement to pay NMW has been met. While some core rules are the same for all four categories, others are different depending on which of the working arrangements apply. They are extremely complex and need to be checked on a case-by-case basis with the legislation.

Pay covered

The starting point in calculating whether the NMW has been paid for each relevant hour worked in the pay period is calculating the gross amount payable before tax and National Insurance are taken out. However, not everything included in the pay packet will count towards the NMW figure.

The legislation sets out a number of items which specifically must be included, such as, pay at basic hourly rate, incentive pay, a worker's pension contributions, bonuses, performance related pay, tips redistributed through the payroll and so on.

The legislation also sets out a number of items which specifically must not be included, such as, benefits in kind in the form of vouchers, stamps or other documents which can be exchanged for money, goods or services, eg luncheon vouchers; payment to the worker of a loan or an advance of wages; allowances for working in unpleasant or dangerous conditions*; allowances for performing special duties over and above normal duties*; unsociable hours payments*; regional allowance payments* eg London weighting; , tips which are paid directly to the worker by a customer and not paid through the payroll and so on.

Records

Employers must keep sufficient records to establish that they are paying their workers at least the NMW and, if there is a dispute, the burden is on the employer to prove that the NMW has been paid.

If a worker has reasonable grounds to believe that he or she has not been paid the NMW he or she has the right to see the employer's records which relate to him or her.

An enforcement officer may also visit a company and ask to inspect the employer's national minimum wage records or require them to be produced on reasonable notice.

Records must be kept for a minimum of three years, but it would be wise to keep them for up to six years (to address civil court claims).

It is a criminal offence if an employer fails to keep records, keeps false records or produces false records

Enforcement

Workers who are paid less than the NMW have a contractual entitlement to recover the difference between what they have been paid and the NMW, either through an employment tribunal for unlawful deduction from wages or by way of an action for breach of contract. From 6 April 2009, workers will be entitled to be repaid any underpayment of the NMW at a higher rate if the NMW has increased since the underpayment. Arrears of pay will be calculated taking into account the rate of NMW in force at the date of determination of the arrears.

Workers have the right not to be subjected to any detriment (harm or damage) by their employer because of action taken to secure their rights to the NMW or other rights, such as access to records, and if they do suffer a detriment they can complain to an employment tribunal.

The dismissal of a worker because he or she has taken action to secure rights to the NMW, (asserting a statutory right), or because of entitlement to the NMW, is automatically unfair. A complaint can be presented to an employment tribunal and there are no age or qualifying service limitations.

Enforcement officers from the Inland Revenue have powers to: (i) require the production of NMW records kept by employers; (ii) require an explanation of such records and certain additional information to be given; (iii) remove records in order to make copies (iv) enter any relevant premises for those purposes (iv) require an employer to attend the enforcement agency office for an interview.

If an officer is of the opinion that an employer has been paying workers less than the NMW, the officer can serve a notice of underpayment on the employer requiring it to pay both present and past workers at a rate at least equal to the NMW, together with any arrears and a financial penalty (payable to the Secretary of State) of 50% of the total underpayment of the NMW, subject to a minimum penalty of £100 and a maximum of £5,000. If the employer complies with the notice within 14 days the financial penalty is reduced by 50%.