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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
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Pay reference periods & elements of pay: national minimum wage pay - calculating a worker’s total remuneration in a pay reference period

 

Relevant legislation

The legislation that applies to this page is as follows:

* National Minimum Wage Act 1998, section 55(2) 

For pay reference periods commencing

* on or after 6 April 2015; National Minimum Wage Regulations 2015, regulation 9
* before 6 April 2015; National Minimum Wage Regulations 1999, regulation 30

National minimum wage pay is calculated by determining the worker’s total remuneration in a pay reference period, and then reducing that amount according to national minimum wage legislation (NMWM09040).

The total remuneration to take into account in each pay reference period is calculated by adding together:

  1. All money payments (NMWM09060) made by the employer to the worker in the pay reference period (NMWM09010) in which it was earned.
  2. Any money payments paid by the employer to the worker in respect of the pay reference period, but paid in the following pay reference period.
  3. Unless the exemptions below relating to workers who submit time sheets apply, pay may only be related back one pay reference period to the period in which it was earned. If payment is made in any later pay reference period, then it cannot be linked back to the pay reference period in which the work was performed and must count in the pay reference period in which it was actually paid.

Example 1: An annual performance bonus is paid in December, in recognition of overall good performance over the whole year. Most of the bonus amount is included in national minimum wage pay in December, but one twelfth of the payment could be included in the preceding month where that is the amount that relates to work performed that month.

Worker is obliged to complete a record of work done

Special rules apply where a worker is obliged to complete a record of work done in the pay reference period (such as a sales record or a timesheet) before they are paid. In these circumstances money payments count as paid in the pay reference period in which they are paid, unless they are:

  1. money payments made by the employer to the worker paid in the pay reference period immediately after the one in which the work is performed, and
  2. money payments made by the employer to the worker later than that, but only when:
* the worker failed to submit the record before the fourth working day of the pay reference period after the one in which the work was performed, and
* the payment is made by the employer in either the pay reference period the record was submitted, or the one immediately following.
* If payments are paid “late” in these circumstances, they are still included in national Minimum Pay for the pay reference period they relate to.

Example 2: A weekly paid commission-only salesman is obliged to send his employer records of sales to calculate his pay. His pay reference period is Monday to Sunday. He submits sales figures for the previous week on a Tuesday and is paid in respect of that return on the Friday.

After working in week 3, he fails to send in his sales figures until the week 5. On the Friday week 4, he receives no pay in respect of week 3, but is paid for two weeks the following week. The amount due in respect of week 3, due to be paid in week 4 but actually paid in week 5 is included for national minimum wage purposes in the total pay for week 3.

  Week 1
5-11April Week 2
12-18April Week 3
19-25April Week 4
26 April -2 May Week 5
3 May -9 May            
             
  Commission earned £200 £100 £200 £250 £150
  Record sheet handed in   13 April (for week 1) 20 April (for week 2)   4 May for both week 3 and 4
  Payment received   16 April      

£200

(week 1) 23 April

£100

(week 2) Nil 7 May

£450

£200 (wk3) +£250 (wk 4)

     
  National minimum wage pay £200
(week 1) £100
(week 2) £200
(week3) £250
(week 4)  

Where employer provides living accommodation

Under some circumstances, when living accommodation is provided free of charge to the worker by the employer, a certain amount can be treated as a payment from the employer to the worker and can count towards the worker’s total remuneration. However, special rules apply about how to calculate the accommodation offset (NMWM10200).