Working time: salaried hours work; worked example of initial calculation year
Example
A 20 year old monthly paid worker starts employment with a retail clothing chain on 10 December 2010, with a contract for 2040 basic hours in the calculation year.
The workers contract states:
 Entitlement to a daily 30 minute lunch break and two 10 minutes “tea breaks” each working day.
 Entitlement to 20 days paid holiday per year
 No pay is provided for the first 3 days of any sickness absence and then full pay for up to 3 months.
The annual salary for the post is:
 £10200 per annum (£850pm) for a 6 month probationary period, followed by
 £11220 per annum (£935pm) according to the employer’s junior sales assistant rate (under age 20), or
 £12750 per annum (£1062.50pm) according to the employer’s general sales assistant rate (over age 20 or more than 12 months employment)
The worker turns 21 years old on their next birthday, 3 June 2011.
Applicable rates  18  20 Year Old Rate  Main Rate 
From 1 October 2010  £4.92  £5.93 
From 1 October 2011  £4.98  £6.08 
Identifying calculation year
NMWM08040: Their calculation year will be 1 January to 31 December, but for the first year of the employment the period will be 10 December 2010 to 31 December 2011.
Identifying the time treated as worked using basic hours
NMWM08035: To identify the time treated as worked for each pay reference period divide the basic hours by 12:
 2040 ÷ 12 = 170 hours
As long as the worker does not exceed the basic hours in the calculation year, the employer must pay at least national minimum wage for 170 hours per month regardless of the time the worker actually spends working.
Identifying adjusted time treated as worked for shortened, first pay reference period
NMWM08050: To identify the time treated as worked for the partial pay reference period 10 December 2010 to 31 December 2010 it is necessary to calculate the number of days in the first pay period (22). The time treated as worked for the shortened, initial pay reference period is;
2040 x 22 = 122.96 hours
365
For this worker the hours treated as worked in the initial, shortened pay reference period is 122.96 hours with each subsequent following pay reference period being 170 hours.
This means that for the initial calculation year 10 December 2010 to 31 December 2011, the total basic hours will be 2162.96 hours (122.96 hours for 10 December 2010 to 31 December 2010 plus 2040 hours for 1 January 2011 to 31 December 2011).
For each pay reference period consider time treated as worked against the national minimum wage pay
NMWM08010: Identify the worker’s national minimum wage pay (NMWM09040) and hours worked and treated as worked for each pay reference period (NMWM09050) of the calculation year.
For example;
Month 1  calculating adjusted time treated as worked

In December 2010, the worker attended work 16 days and actually worked (including paid breaks) a total of 125 hours 20 minutes. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 133 hours 20 minutes (125 hours 20 minutes worked plus 8 hours unpaid additional work (16 days of 30 additional minutes).
 As the cumulative excess hours of 133 hours 20 minutes is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid at least national minimum wage for the adjusted time treated as worked for the shortened pay reference period; 122.96 hours (see above and NMWM08050).

The worker was paid £615 for the shortened month, from which the employer deducted £100 to cover the worker’s required purchase of seasonal clothes to wear on the shop floor. This deduction (NMWM11220) reduced the national minimum wage pay to £515 (£615 less £100).
 The worker was entitled to be paid at least £604.96 (122.96 hours at £4.92 rate). National minimum wage pay of £515 means that the worker has been underpaid £89.96 for this pay reference period.
Month 2  identifying unpaid hours worked

In January 2011, the worker attended work 21 days and actually worked (including paid breaks) a total of 164 hours 30 minutes. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 175 hours (164 hours 30 minutes worked plus 10 hours 30 minutes unpaid additional work (21 days of 30 additional minutes).
 As the cumulative excess hours of 308 hours 20 minutes is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £850 for the month.
 The worker was entitled to be paid at least £836.40 (170 hours at £4.92 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 3  considering paid absences

In February 2011, the worker attended work 15 days and actually worked (including paid breaks) a total of 117 hours 30 minutes. The worker took 5 days paid holiday (calculated by the employer as 5 days of 7 hours 50 minutes (7 5/6 hours). In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 164.17 hours (117.50 hours worked, 39.17 hours holiday, plus 7.50 hours unpaid additional work (15 days of 30 additional minutes).
 As the cumulative excess hours of 472.50 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £850 for the month.
 The worker was entitled to be paid at least £836.40 (170 hours at £4.92 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 4  considering paid and unpaid absences

In March 2011, the worker attended work 18 days and actually worked (including paid breaks) a total of 141 hours. The worker was absent due to sickness for 5 days (calculated by the employer as 3 unpaid days totalling 23.50 hours and 2 paid days of 15.67 hours). In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 189.17 hours (141 hours worked, 39.17 (5 days) sick absence, plus 9 hours unpaid additional work (18 days of 30 additional minutes).
 As the cumulative excess hours of 661.67 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 146.50 hours (170 hours less the 23.50 hours for 3 days unpaid absence, see NMWM08070).

The worker was paid £850 for the month from which the employer deducted £100 to cover the worker’s required purchase of seasonal clothes to wear on the shop floor. This deduction (NMWM11220) reduced the national minimum pay to £750 (£850 less £100).
 The worker was entitled to be paid at least £720.78 (146.50 hours at £4.92 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 5  checking excess hours position

In April 2011, the worker attended work 21 days and actually worked (including paid breaks) a total of 164 hours 30 minutes. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 175 hours (164 hours 30 minutes worked plus 10 hours 30 minutes unpaid additional work (21 days of 30 additional minutes).
 As the cumulative excess hours of 836 hours 40 minutes is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £850 for the month.
 The worker was entitled to be paid at least £836.40 (170 hours at £4.92 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 6  checking excess hours position

In May 2011, the worker attended work 12 days and actually worked (including paid breaks) a total of 94 hours. The worker took 10 days paid holiday (calculated by the employer as 10 days of 7 5/6ths). In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 178 hours 20 minutes (94 hours worked, plus 78 hours 20 minutes holiday absence (10 days holiday) plus 6 hours unpaid additional work (12 days of 30 additional minutes).
 As the cumulative excess hours of 1015 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £850 for the month.
 The worker was entitled to be paid at least £836.40 (170 hours at £4.92 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 7  taking increase of pay into consideration

In June 2011, the worker attended work 22 days and actually worked (including paid breaks) a total of 172.33 hours. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 183.33 hours (172.33 hours worked plus 11 hours unpaid additional work (22 days of 30 additional minutes).
 As the cumulative excess hours of 1198.33 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £935 for the month having been placed by the employer onto the junior sales assistant rate. From this pay the employer deducted £100 to cover the worker’s required purchase of seasonal clothes to wear on the shop floor. This deduction (NMWM11220) reduced the national minimum pay to £835 (£935 less £100).
 The worker was entitled to be paid at least £836.40 (170 hours at £4.92 rate) so the worker has been underpaid £1.40 (amount due £836.40 less amount paid £835) for this pay reference period.
 The worker turned 21 during this pay reference period so will become entitled to the 21 and over rate from the first pay reference period starting on or after the 21st birthday (NMWM03110).
Month 8  taking new age rate into consideration

In July 2011, the worker attended work 21 days and actually worked (including paid breaks) a total of 164.50 hours. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 175 hours (164.50 hours worked plus 10.50 hours unpaid additional work (21 days of 30 additional minutes).
 As the cumulative excess hours of 1373.33 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £935 for the month.
 The worker was entitled to be paid at least £1008.10 (170 hours at £5.93 rate) so the worker has been underpaid £73.10 (amount due £1008.10 less amount paid £935) for this pay reference period.
Month 9  checking excess hours position

In August 2011, the worker attended work 23 days and actually worked (including paid breaks) a total of 180.17 hours. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 191.67 hours (180.17 hours worked plus 11.50 hours unpaid additional work (23 days of 30 additional minutes).
 As the cumulative excess hours of 1565 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £1062.50 for the month having been placed by the employer onto the general sales assistant rate.
 The worker was entitled to be paid at least £1008.10 (170 hours at £5.93 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 10  deduction reducing pay

In September 2011, the worker attended work 22 days and actually worked (including paid breaks) a total of 172.33 hours. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 183.33 hours (172.33 hours worked plus 11 hours unpaid additional work (22 days of 30 additional minutes).
 As the cumulative excess hours of 1748.33 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £1062.50 for the month from which the employer deducted £100 to cover the worker’s required purchase of seasonal clothes to wear on the shop floor. This deduction (NMWM11220) reduced the national minimum pay to £962.50 (1062.50 less £100).
 The worker was entitled to be paid at least £1008.10 (170 hours at £5.93 rate) so the worker has been underpaid £45.60 (amount due £1008.10 less amount paid £962.50) for this pay reference period.
Month 11  taking rate change into consideration

In October 2011, the worker attended work 16 days and actually worked (including paid breaks) a total of 125.33 hours. The worker took 5 days paid holiday (calculated by the employer as 5 days of 7 5/6ths hours). In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 172.50 hours (125.33 hours worked, 39.17 hours paid holiday plus 8 hours unpaid additional work (16 days of 30 additional minutes).
 As the cumulative excess hours of 1920.83 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £1062.50 for the month.
 The worker was entitled to be paid at least £1033.60 (170 hours at £6.08 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 12  checking excess hours position

In November 2011, the worker attended work 22 days and actually worked (including paid breaks) a total of 172.33 hours. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 183.33 hours (172.33 hours worked, plus 11 hours unpaid additional work (22 days of 30 additional minutes).
 As the cumulative excess hours of 2104.17 hours is less than the basic hours for the calculation year (2162.96) no excess hours calculation is required for this pay reference period. For NMW purposes the worker must be paid for this pay reference period at least national minimum wage for 170 hours.

The worker was paid £1062.50 for the month.
 The worker was entitled to be paid at least £1033.60 (170 hours at £6.08 rate) so the worker has been paid at least national minimum wage for this pay reference period.
Month 13  excess hours calculation

In December 2011, the final pay reference period of the calculation year, the worker attended work 22 days and actually worked (including paid breaks) a total of 172.33 hours. In addition, the employer required the worker each day to arrive 15 minutes early to prepare the salesstation and stay behind 15 minutes to account for sales. Neither of these 15 minute periods was recorded as worked by the employer.
 The time counted for excess hours purposes is 183.33 hours (172.33 hours worked, plus 11 hours unpaid additional work (22 days of 30 additional minutes).
 As the cumulative excess hours of 2287.50 hours is more than the basic hours for the calculation year (2162.96) an excess hours calculation is required for this pay reference period (NMWM08130).
 The 170 hours originally treated as worked is no longer representative of time worked as it has been exceeded during the pay reference period. Additional hours therefore need to be taken into consideration. The employer identifies that the worker worked his basic hours by 9 December 2011.
 Step 1. Calculate the proportion of basic hours falling BEFORE the basic hours are exceeded, 1 December to 8 December (8 days);
2040 x 8 = 44.71 hour
365
* On completion of this calculation, any absences during the pay reference period which formed part of the basic hours but where less than the normal salary was paid must be subtracted from the final result.
* Step 2. Calculate the proportion of basic hours falling AFTER the basic hours are exceeded  9 December to 31 December (23 days);
2040 x 23 = 128.55 hours
365
* Step 3. Identify the actual hours worked and treated as being worked in the pay reference period after the basic hours were exceeded.
* In this case, the employer identified that the worker worked 117.50 hours after the basic hours were exceeded.
* Step 4. Add together the results of steps 1, 2 and 3 to give the adjusted number of hours to be treated as worked in December: 290.76 (44.71 + 128.55 + 117.50).
* This means that as a consequence of the excess hours the employer must increase the number of hours treated as worked for national minimum wage purposes from 170 to 290.76 hours.

The worker was paid £1062.50 for the month.
 The worker was entitled to be paid at least £1767.82 (290.76 hours at £6.08 rate) so the worker has been underpaid £705.32 (amount due £1767.82 less amount paid £1062.50) for this pay reference period.

Only when the worker’s cumulative excess hours exceed the basic hours for the calculation year is it necessary to perform any additional calculation to take account of those excess hours.
Expanded form of this example calculation (Excel 67kb).