For most employers, compliance with the national minimum wage (NMW) rules are just something they have to live with. Non-compliance is rarely a conscious ‘fiddle’ by business owners, and even though non-compliance still occurs 18 years after the NMW rules were introduced, it is generally accidental, not helped by the complexity of the rules. The current government guide to the NMW comprises of some 60 pages. HMRC’s NMW compliance manual is over 300 pages. This special NDNA Factsheet addresses some of the areas of confusion experienced by members.
NMW Rates and Apprentices
The NMW is paid at a number of different rates.
There are currently (in the year 2021/22) four ‘wage for age’ rates – the ‘junior’ rate for ages 16 and 17 (£4.62an hour), the ‘development’ rate for ages 18 to 20 (£6.56 an hour), the adult rate for ages 21 to 22 (£8.36 an hour), and the ‘national living wage’ rate (£8.91 an hour) for ages 23 and over. In addition to the ‘wage for age’ rates, there is also an apprentice rate of £4.30 an hour for apprentices under age 19 or aged 19 and over but in the first year of their apprenticeship.
Whether or not someone is actually an apprentice is a matter of fact. An apprentice has to be taking part in a recognised apprenticeship and not just someone who’s called an ‘apprentice’. This means that, if you engage a 16-year old in August with a view to them commencing an official apprenticeship in September, as they are not an apprentice until September, paying them the apprentice rate in August would not satisfy the NMW rules.
The NMW does not have to be paid for every hour worked, but it has to be paid on average over the pay reference period. Using the current national living wage rate of £8.91 an hour as an example (this rate will be used for all the examples that follow), an employee with a weekly pay reference period who is paid £9.10 an hour for 40 hours could theoretically be paid a token £5.00 an hour for an odd hour’s overtime. The total pay would be £369.00 and the total hours would be 41, giving an average of £9.00 an hour – which is above the NMW. In contrast, someone on the NMW who stays behind for an hour because a parent is late collecting their child needs to be paid at least the NMW for that additional hour.
What Counts as ‘Pay’?
There are two elements that make up the ‘rate of pay’ for NMW purposes – pay that counts in the pay reference period and hours that count in the pay reference period. The pay that counts divided by the hours that count gives the average hourly rate of pay.