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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
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Working time: salaried hours work; considering adjustments where contract varied once

Relevant legislation

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 25
* before 6 April 2015; National Minimum Wage Regulations 1999, regulations 22(2) & 23(4)

General

The hours to be treated as worked in each pay reference period (NMWM09010) for a worker performing salaried hours work is based on a calculation using the worker’s basic hours (NMWM08030). This calculation enables annualised hours in a calculation year (NMWM08040) to be treated as being worked evenly throughout a year. However, where a worker’s contract is varied during the course of the calculation year, so that the hours under the contract are increased or reduced, it is necessary to adjust the basic hours for the calculation year to reflect the variation.

Where the contract is varied so that the worker ceases performing salaried hours work the adjustment to the basic hours is applied as if the worker ceases work (NMWM08060).

Calculating basic hours where salaried hours contract varied

Where the worker continues to perform salaried hours work but the contract is varied, it is necessary to adjust the basic hours for the calculation year using a pro rata calculation as follows;

  1. the proportion of the basic hours attributable to the period from the start of the calculation year up to the day before the contract is varied, and
  2. the proportion of the basic hours attributable to the period[s] following the variation for the remainder of the calculation year.

The adjusted basic hours for the calculation year will be the total of a. and b.

  1. is calculated using the formula B1 x        D1  
                  365

Where:

B1 is the worker’s original basic hours ([NMWM08030](https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm08030)), and

D1 is the number of days in the calculation year for which the original basic hours apply.
  1. is calculated using the formula B2 x       D2   
                   365

Where:

B2 is the worker’s revised basic hours, and

D2 is the number of days for which the new basic hours apply.

If a contract is varied again, i.e. more than once, it is necessary to re-visit calculation b. from the date of the new variation (NMWM08090).

Example: adjusting basic hours where contract varied

A monthly paid worker performing salaried hours work has a calculation year from 1 April to 31 March with 2080 basic hours.

From 1 January, the worker’s contract is reduced to 1820 basic hours.

The proportion of the basic hours attributable to the period from the start of the calculation year to the day before the variation, 1 April to 31 December (275 days) is;

 

a.         2080 x         275        = 1567.12 hours
                                     365

The proportion of the basic hours attributable to the period following the variation, 1 January to 31 March (90 days) is;

b.       1820 x            90             = 448.77 hours
                                    365

Therefore the adjusted basic hours for the calculation year from the 1 January variation will be 2015.89 hours (the total of a. 1567.12 hours and b. 448.77 hours).

If there are no further variations in the calculation year, the time treated as worked in each pay reference period will be;

  • 173.33 hours (173 hours 20 minutes) for the 9 months April to December based on the calculation, 2080 ÷ 12 (NMWM08035), and
  • 167.99 hours (168 hours) for the 3 months January to March based on the calculation, 2015.89 ÷ 12

Expanded form of this example calculation (Excel 32kb).

Comparison of adjusted basic hours against actual time worked

Any checks regarding whether the worker has actually worked excess hours (NMWM08100) and when, will be based on the final version of the basic hours that applies to the calculation year.