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HMRC internal manual

National Minimum Wage Manual

Pay reference periods & element of pay: payments made by the employer at and after the end of the employment

Relevant legislation

The legislation that applies to this page is as follows:

* National Minimum Wage Act 1998, section 17 

For pay reference periods commencing

* on or after 6 April 2015; National Minimum Wage Regulations 2015, regulations 9 & 10
* before 6 April 2015; National Minimum Wage Regulations 1999, Regulation 30

It is important to understand the exact nature of any payments made after the end of a worker’s employment.

For treatment of specific payments linked to leaving see (NMWM09200)

For pay reference periods where payments are made after the end of the employment see (NMWM09030)

Payments to cover weeks/months “in hand” or “lying on”

Some workers work a week or a month “in hand” or “lying on”. Payments made in the pay reference period after they are earned can be reallocated back to the pay reference period in which they are worked (NMWM09050).

In addition, if the worker has a pay reference period of less than a month, then any payment made in the month following the termination of his employment will count towards national minimum pay in the worker’s final pay reference period (see NMWM09030)

Payments to repay deposits

Payments to repay amounts deducted earlier in the employment as deposits for items count towards national minimum wage pay in the worker’s last PRP provided they are repaid in that PRP or in the month after the employment ends.

For example, in the first week of his employment the worker had £10 deducted from his wage as a deposit for a uniform (NMWM11200). This reduced NMW pay by £10 in the first PRP. Two weeks after he leaves the employment, he returns the uniform to his employer in good condition and £10 is returned to him. The £10 will count towards national minimum wage pay in his last pay reference period(NMWM11020)

Arrears of national minimum wage pay

Legislation allows for payment of additional remuneration to allow an employer to self-correct an underpayment of national minimum wage pay.

A self corrected payment of NMW arrears does not count as a NMW pay in the pay reference period in which it is made (NMWM09050).

However, it is important to ensure that a payment called a self correction and made after a worker leaves the employment is a genuine payment of NMW arrears and not for something else.

For example, an employer makes a £5 deduction from the worker’s pay in the first pay reference period, which is in respect of a “deposit” for a locker key that reduces the calculation of NMW pay. This amount will reduce the worker’s NMW pay in the pay reference period in which it is deducted (NMWM11020 refers).

The worker is employed for two years and at the end of the employment, the employer repays the “deposit” to the worker in the final pay reference period when the key is returned.

Evidence about the nature of the payment should be obtained and considered to form a view as to whether the repayment to the worker is a repayment of the deposit. Some employers may argue it is a self-correction and repayment of any NMW arrears which arose in the worker’s first pay reference period when the deposit was deducted. However, a repayment of arrears should be clearly identified as such in the employer’s records, with the appropriate uplift applied. If it is not, the repayment of the deposit in the final pay reference period is not repayment of NMW arrears arising in the first pay reference period, but simply an amount to be taken into account as national minimum wage pay in the last pay reference period. This means the underpayment in the first pay reference period will still be outstanding.

If the worker’s employment lasts more than two pay reference periods, any on-going pay practice whereby the employer deducts and withholds pay which is later repaid in whole or part to their workers, should be considered as possible failure to pay national minimum wage, should that initial deduction reduce the worker’s NMW pay below the applicable NMW rates in the pay reference period it is deducted.

Payments for expenses made to employer or a third party after employment ends

Payments made by the worker on account of expenditure in connection with his employment (NMWM09170) which are made in the month after that employment ends, should be treated as made in the worker’s final pay reference period.

For example, a fortnight after his employment ends, a worker pays an invoice from his local petrol station for fuel for business travel in the van he used to drive for his employer. The payment is expenditure on account of his ex employment and is treated as having been made in his final pay reference period. It will reduce national minimum wage pay in the worker’s final pay reference period.

See (NMWM11160) for deductions or payments to the employer related to leaving employment.