Types of work: salaried hours work conditions - basic annual hours
The legislation that applies to this page is as follows:
For pay reference periods commencing
* on or after 6 April 2015; National Minimum Wage Regulations 2015, regulation 21(3) * before 6 April 2015; National Minimum Wage Regulations 1999, regulation 4
For a worker to be performing salaried hours work (NMWM07020) they must be working under a contract to do salaried hours work and meet all the necessary conditions (NMWM07025). One of these conditions is that the basic annual hours the worker must work under his salaried work contract must be able to be identified or ascertained.
Establishing the annual ascertainable basic hours
- The basic annual hours in a full calendar year covered by the annual salary payment must be able to be identified. The employer should be asked to provide the relevant information. If these hours cannot be established, then the worker cannot be performing salaried hours work.
- For the purposes of salaried hours work, it is not necessary for all the basic annual hours to be working hours but they must be hours for which the worker is entitled to be paid his annual salary under his salaried hours work contract.
- It is important to be able to determine exactly which hours are included in the basic annual hours paid for by the salary. For example, it will be necessary to establish how hours of absence (such as holidays) and any overtime are treated.
- Where a contract specifies a minimum number of hours to be worked, such as no less than 170 hours per month, then is not possible to ascertain the exact number of basic hours to be worked for the annual salary and the worker will not be performing salaried hours work.
- Where a contract specifies a minimum number of hours to be worked plus further hours as necessary or when required, it is not possible to ascertain the exact number of basic hours to be worked for the annual salary and the worker will not be performing salaried hours work.
- For the purposes of salaried hours work, it is not possible for the basic annual hours to include hours for which the worker is not entitled to be paid under his contract.
- Where a contract does not specify the number of hours to be worked in a year there may still be enough information to ascertain the basic annual hours for the whole year. For example, a worker who must work 170 hours a month under his contract may have ascertainable basic hours of 2040 hours a year (170 x 12 months). However, a contract which describes hours to be worked on a weekly basis ONLY (such as 40 hours a week) would not contain sufficient information to determine the basic hours because a weekly calculation would not cover a full calendar year.
It is perfectly acceptable for the employer to provide information which allows the basic hours to be ascertained for a full calendar year. Where an employer provides a “calculation” of basic hours it is important that all the basic hours covered by the annual salary for the full calendar year are taken into account. It is not sufficient to provide only the hours worked in 52 weeks of the year. For example, the employer may provide evidence of a worker’s hours and his shift patterns for a full year or may use a formula. The important thing is to be able to obtain an accurate representation of the basic hours over the full calendar year for which the annual salary is payable and the hours should be part of the contractual arrangements. This does not need to be done on the same basis as how the salary is calculated or paid and it is possible that the contractual arrangements may allow for the basic hours to vary year on year. The employer should be able to fully explain the formula/methodology used to the National Minimum Wage Officer. Under no circumstances should the National Minimum Wage Officer use their own method/formula or suggest a method/formula to the employer.