National Minimum Wage October 2009

Key Questions

1.   Who does not have to be paid the National Minimum Wage?
- the genuinely self employed
- child workers - anyone of compulsory school age (i.e. until the last Friday in June of the school year they turn 16)
- company directors who do not have contracts of employment
- some apprentices, for example those under 19
- some other trainees on government funded schemes or programmes supported by the European Social Fund
- students doing work experience as part of a higher education course
- people living and working within the family, for example au pairs
- friends and neighbours helping out under informal arrangements
- members of the armed forces
- share fisherman
- prisoners
- volunteers and voluntary workers
- religious and other communities

Please note that HMRC have the power to serve an enforcement notice requiring the payment of at least the NMW, including arrears, to all family members working for a limited company.

2.   What is taken into account in decided whether the NMW has been paid?
The amounts to be compared with the NMW include basic pay, incentives, bonuses and performance related pay and also the value of any accommodation provided with the job.

Overtime, shift premiums and regional allowances are not to be taken into account and benefits other than accommodation are excluded.

3.   What records are needed to demonstrate compliance?
There is no precise requirement but the records must be able to show that the rules have been complied with if either the HMRC or an Employment Tribunal requests this to be demonstrated.  Where levels of pay are significantly above the level of the NMW, special records are not likely to be necessary.

It is recommended that the relevant records are kept for at least six years.

Normally there is not likely to be any serious difficulty in demonstrating compliance where employees are paid at hourly, weekly, monthly or annual rates but there may be difficulties where workers are paid on piece-rates and where, for example, they work as home workers.

Where piece rates are used, employers must give each worker a written notice containing specified information before the start of the relevant pay period.  This includes confirmation of the 'mean' hourly output and pay rates for doing their job.

4.   What rights do workers have?
Workers are allowed to see their own pay records and can complain to an Employment Tribunal if not able to do so.

They can also complain to HMRC or to a Tribunal if they have not been paid the NMW.  They can call the confidential helpline 0845 6000 678.

5.   What are the penalties for non-compliance?
Enforcement notices can be issued if underpayments are discovered and there can be a penalty equivalent to twice the hourly amount of the NMW for each worker that has been underpaid multiplied by the number of days that enforcement notices are not complied with.

There could also be a maximum fine of £5,000 for having committed a criminal offence.

Employers who refuse to pay the NMW may also face a fine of £200 for every worker they underpay.  Employers have to pay back arrears they owe to workers and those who refused to pay up could be penalised.

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