Greater Manchester Pay and Employment Rights Advice Service Factsheet

Since 1999 most workers in the UK have been entitled by law to be paid a minimum hourly rate of pay. The minimum wage applies to all workers, not just employees. For example, it covers agency workers and homeworkers. Employers have a duty to ensure that their workers are paid at least the minimum wage on average for the hours they have worked in the pay reference period.This factsheet is intended as a general guide to the minimum wage regulations and is not a statement of law. Workers should get advice before taking any action. This is the period in respect of which wages are paid; normally this will be weekly, fortnightly or monthly. It cannot be longer than a calendar month. It is an offence for employers not to pay the minimum wage if they are required to do so.

Who is not entitled to the Minimum Wage?

• children under school-leaving age;
• people on work experience of not more than a year as part of a higher education course;
• apprentices under 26 in the first year of their apprenticeship;
• share fishermen;
• voluntary workers for charities and similar organisations who only get expenses;
• prisoners doing work in prison;
• people on various government training, work experience or temporary work schemes;
• people living and working in the employer’s home, treated as a member of the family, and doing work which would otherwise be done by a member of the family;
• family members living and working in the family home, or living in the family home and working and participating in the family business;
• certain homeless people in hostels where they work in return for accommodation.

The rates

For workers who are not exempt, the following rates apply from 1^st October 2010. Increases apply from 1^st October 2011.

• Workers aged 21 years and over are entitled to £5.93 per hour, rising to £6.08 on 1.1.11.
• Development rate; workers aged 21 and over who are in the first six months of working for a new employer and are undergoing training for a recognised qualification get £4.92 per hour, rising to £4.98 on 1.10.11.
• Workers aged 18-20 are entitled to £4.92 per hour, rising to £4.98 on 1.10.11.
• Young workers aged 16-17 who have reached the end of compulsory education are entitled to £3.64 per hour, rising to £3.68 on 1.10.11.
• Apprentices under 19 are entitled to £2.50 per hour from the start of their second year of apprenticeship, rising to £2.60 on 1.10.11. At 19 apprentices become entitled to the 18-20 rate. The government recommends that apprentices who do not qualify for the minimum wage receive at least the Lower Earnings Limit figure. This is currently £102 per week (to 6^th April 2012).

The minimum wage rules identify three different kinds of work, and the minimum wage is applied differently for each one. All workers fit into one of the following categories, and before you can work out whether you are getting the minimum wage you are entitled to you must decide which type of work it is that you do.

Salaried hours work is when workers are paid a salary by regular instalments for a basic number of hours per year regardless of the number of hours worked in the pay period. In this case workers must be paid at least the minimum wage for the number of hours they have worked. But because they are paid in regular instalments rather than for hours worked the calculations are more complex. In this instance, salaried workers should divide the salary instalments by the number of hours actually worked in the pay reference period to check they are getting the minimum wage.

Time work is when workers work a certain number of hours for which they receive payment. Workers who work partly on a time basis and partly on a piecework/commission basis also come into this category. In this case, workers must be paid for the number of hours they have worked.

Output work is when workers are employed and paid on a piecework or commission basis only, so they only get paid for the actual work they do or the sales they make. In this case workers must be paid at least the minimum wage for the total number of hours spent doing output work, unless:

• the worker’s contract does not set any normal, minimum or maximum working hours; and
• the employer does not in practice determine or control the hours worked by the worker; and
• the employer has calculated the “mean hourly output rate” for the piece or task in question. This is the average number of pieces or tasks that can be done in one hour, by workers doing that job for that employer, and
• the employer has given the worker written information about it before the start of the relevant pay reference period.

Employers must multiply the mean hourly output rate by 1.2 and pay that, in order that workers who work at a slower pace do not lose out.

Unmeasured work is when workers are not paid on a time, salaried or output basis, for example workers who live on the premises and need to be available 24 hours a day. In this case, workers will be paid in one of two ways:

• for the hours actually worked: or
• for a number of agreed hours (the worker and the employer must have made an agreement about the average number of hours likely to be spent on the required duties in a normal working day and this must be shown by the employer to be a “realistic” estimate).

Special situations

• Where workers have stand-by or on-call arrangements they will be paid for the time when they are on standby or on call, provided they are available at or near the place of work. If their home is at or near the place of work and the time in question is time during which they are entitled to be at home, they are not entitled to the minimum wage for that time.
• Workers who are provided with suitable sleeping facilities by their employer and who sleep on the employer’s premises are not entitled to the minimum wage for the time when they are asleep, only when they are actually working.
• Workers should be paid for “downtime”, when machinery does not work.
• Workers will be paid for travel time on business (but not to or from the normal workplace).
• Workers will be paid for time spent on training and travelling to and from a place of training which is not the normal workplace.
• The minimum wage will not be paid when a worker is taking industrial action.
• The minimum wage will not be paid for rest breaks, or absence through illness.

How the Minimum Wage should be calculated

Not everything included in the pay packet will count towards the minimum wage. The pay which counts towards the minimum wage is calculated by taking gross pay (before tax and National Insurance are taken out) in the pay period and adding any amounts paid in the next pay period which have been earned in this pay period. The following, which do not count towards the minimum wage, are then taken off gross pay:

• any money payments paid for work done in the previous pay reference period;
• any money payments for time when the worker was absent from work (except for salaried workers, where different calculations apply);
• any overtime or shift premia including premium rates for output work;
• any allowance for special circumstances, e.g. dangerous work, performing special duties, standby or on-call payments, unsocial hours payments, London weighting (but performance or incentive pay does count towards the minimum wage);
• repayment of expenses, e.g. for travel on business;
• deductions made by an employer for tools, equipment, etc, needed for the job, or payments made by the worker to the employer for such purposes;
• deductions for living accommodation above the amount allowed, which is £4.51 per day rising to £4.61 per day on 1^st October 2010, up to a maximum amount of £31.57 per week rising to £32.27 on 1^st October 2010;
• benefits in kind, such as luncheon vouchers.

There are some deductions made by employers which are not taken off gross pay when working out what counts towards the minimum wage. These are:

• deductions made on account of the worker’s misconduct or other behaviour for which the worker is contractually liable to the employer;
• deductions made to recover repayment instalments in respect of a loan or advance of wages made to the worker;
• deductions on account for the purchase of shares or other securities by the worker;
• payment for goods or services supplied by the employer unless the worker is bound to make the purchase under the contract or some other requirement imposed by the employer;
• deductions made for accidental overpayment of wages.

Tips and the minimum wage

From 1 October 2009 employers have not been allowed to use tips to make up wages to the National Minimum Wage, regardless of whether you receive them through the payroll or in some other way.

Employers’ records

Employers must keep records for all employees which are sufficient to show how the minimum wage pay has been calculated. These details must be capable of being produced in a single document. If you think that you are being underpaid you have the right to see and copy these records. To do this:

• you must give the employer a “production notice”, i.e. a note asking to see your minimum wage records;
• your employer must produce the records within 14 days of the request.

You can see the records on your own, or you can have somebody go with you. If your employer does not produce some or all of the records, you can complain to an Employment Tribunal. This must be done within three months. If the Tribunal finds the employer did not give you proper rights to see your records, they can make the employer pay you 80 times the hourly minimum wage rate.

Minimum Wage enforcement

The government has made HM Revenue & Customs responsible for making sure that employers are paying the minimum wage. The HMRC has a wide range of powers, including legal powers to inspect wage records, to issue enforcement notices in respect of former workers as well as current workers, and to prosecute employers. To make a complaint about failure to pay the minimum wage, ring the government`s Pay and Work Rights Helpline on 0800 917 2368.

Other rights

Besides the right to be paid the minimum wage, the law also says that:

• workers must not suffer “detriment” for exercising their right to a minimum wage. This means that employers must not victimise workers by, for example, changing their terms and conditions because they have asked for the minimum wage.
• Workers must not be dismissed for asserting their rights to the minimum wage. Workers can claim unfair dismissal even if they have not been in that job for one year if they are sacked for asking about the minimum wage.  

Enforcing your rights

The HMRC cannot help with detriment or dismissal because of the minimum wage, only with underpayments. Workers who have suffered detriment because they asserted their rights under the minimum wage regulations should first of all send their employer a grievance letter; see our factsheet on Grievances for guidance about this.

A dismissal for asserting these rights is automatically unfair.

0161 839 3888 phone and fax 0161 839 3883,

or visit our website: www.gmemploymentrights.org.uk

Trade Unions

Trade unions help workers to get better pay and work conditions. Contact the

North West TUC, tel 0151 236 5432              

April 2011