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HMRC internal manual

National Minimum Wage Manual

Pay reference periods & elements of pay: bonuses

Relevant legislation

The legislation that applies to this page is as follows:

* National Minimum Wage Regulations 2015, regulations 3 & 9

Bonuses are payments paid by the employer to the worker for specific purposes. How they affect national minimum wage pay depends on what they are for and each case must be considered on its own merits to decide if the bonus should be treated as a payment for national minimum wage purposes (NMWM09060), and if so, whether it needs to be reduced from the calculation of national minimum wage pay (NMWM09040).

Although most common bonuses, for example; Christmas Bonuses or discretionary bonuses, will count towards national minimum wage pay, it is very important to take care to establish the true nature of the payment. For instance a payment termed an “attendance bonus” may be classed as an allowance for national minimum wage purposes. (NMWM09090).

Performance Bonuses

Performance bonuses count towards a worker’s total remuneration. A “performance bonus” is a payment attributable to the quality or amount of work done. It is not necessarily payable directly in respect of work done in specific hours and can be paid in respect of more than one pay reference period and in respect of ‘team performance’.

Because a payment for a performance bonus may be related to more than one pay reference period, care must be taken to ensure the payment is allocated to the correct pay reference periods (NMWM09050) when calculating national minimum wage pay.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)