The national minimum wage is enforced by HMRC and is designed to make sure that workers receive a fair wage. No matter how small or large a business it still applies. However, it is not quite as simple as a minimum hourly rate; there are different rates for different ages and separate rates for apprentices.
If you get reported to HMRC for not paying the National Minimum Wage then the fines can be very large, along with having to pay what should have been due to the employee’s that are found to be under the level.
HMRC law on types of pay
There are several different ways you and an employee may come to an agreement on pay, by the hour, an annual salary or piecework. Whichever of these is used you must still do the calculation to make sure that your employee is receiving the national minimum wage.
If someone is paid annually it is easy enough to break that down to an hourly rate. If they are paid by piecework then it is a little trickier. First you must calculate what an average completion rate of pieces per hour is and then ensure the combined piece rate for these is at least minimum wage.
Examples of National Minimum Wage
On the current rates of minimum wage this means if you employ someone who is over 21 for 40 hours per week they are entitled to a minimum of £6.19 per hour, meaning that their weekly gross pay should be no less than £247.60.
If you were to employ someone aged 18-20 they would be entitled to £4.98 per hour; so if they worked a 20-hour week their gross must be no less than £99.60.
Where people usually get caught out is when they offer someone a weekly amount e.g. you employ a part time secretary for 20 hours per week and agree to pay her £120.00. Assuming she is over 21 then £120.00 would be below the National Minimum Wages levels, opening you up to being reported and fined.
There is a lower rate for apprentices (currently £2.65). This rate only applies if they are under 19, and is only valid for their first year of apprenticeship, after this time the normal minimum wage rates apply.
Who is and isn’t entitled?
There are circumstances when the National Minimum Wage doesn’t apply; if you are self employed, a company director, volunteer, share fishermen, prisoner, working in a religious community, when receiving accommodation etc. (au pairs) or if you are a family member of the employer and still living at home.
Those who are entitled include: part time, casual labour (e.g. hired for 1 day), foreign workers, disabled workers, those on probation, apprentices and agency workers.
Current table of rates. (Updated yearly, always check for most up to date)
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