Employment
and related matters
The
National Minimum Wage
The
National Minimum Wage (NMW) was introduced on 1 April 1999.
There have already been a number of instances of employers
being penalised for not complying with the legislation. The
Revenue is the agency that ensures enforcement of the NMW.
We highlight below the main principles of the minimum wage
regulations.
Please contact us for further specific advice.
What
is the National Minimum Wage?
The
current standard rate of the NMW is £4.85 per hour.
The current rate for employees between 18 and 21 years old
is £4.10 per hour.
From October 2004, 16 and 17 year olds must be paid a legal
minimum wage for the first time. The rate is £3 per
hour.
Workers of 22 years and over can be paid a minimum of £4.10
per hour for the first six months of a new job for a new employer
if they are receiving accredited training, which means attending
certain training courses where the training institution involved
is receiving government support.
In addition, October 2004 also saw fair piece rates introduced.
Employers must now pay their output workers the minimum wage
for every hour they work based on an hourly rate derived from
the time it takes a worker working at average speed to produce
the work in question.
There are no exemptions from paying the NMW on the grounds
of the size of the business.
Key
Questions
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Who
does not have to be paid the National Minimum Wage?
- The
genuinely self-employed.
- 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
fishermen.
- Prisoners.
- Volunteers
and voluntary workers.
- Religious
and other communities.
Please
note that the Revenue has 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.
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What is taken into account in deciding 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 also excluded.
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
Revenue 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.
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 the Revenue or to a Tribunal if
they have not been paid the NMW. They can call the confidential
helpline 0845 6000 678.
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.
How
We Can Help
We
will be more than happy to provide you with assistance or
any additional information required.
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For information of users: This material is published
for the information of clients. It provides only an overview
of the regulations in force at the date of publication, and
no action should be taken without consulting the detailed
legislation or seeking professional advice. Therefore no responsibility
for loss occasioned by any person acting or refraining from
action as a result of the material can be accepted by the
authors or the firm.
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