Pay - an overview of obligations

Rates and calculation of the National Minimum Wage

As of 1 October 2005, the three rates of the National Minimum Wage (NMW) are:

• The adult rate of £5.05 per hour for workers aged 22 and over.
• The development rate of £4.25 per hour for workers aged 18 to 21. The development rate for those aged 22 or over who receive accredited training for six months after they start work also stands at £4.25 an hour as of 1 October 2005.
• A third rate of £3 per hour for workers aged 16 to 17 and who are above the age of compulsory schooling.

Calculating the NMW
How the NMW is calculated depends on whether the work is:

• time work - a set number of hours or period of time
• salaried-hours work - a set number of hours each year, paid by annual salary
• output work - payment is according to the number of things produced or tasks performed
• unmeasured work - specific tasks but no set hours

On 1 October 2004 the government introduced changes on how the minimum wage applies to output workers. They are those paid by the piece of work produced or task performed, and include homeworkers. Employers either had to pay their output workers the minimum wage for every hour they work, or pay a fair piece rate that allowed an average worker to earn the minimum wage.

From 6 April 2005, the way in which fair piece rates are calculated changed. If you pay your output workers a fair piece rate allowing the average worker to get the minimum wage, that rate must be multiplied by 1.2. This is aimed at making sure that output workers who are slightly slower than average will receive the National Minimum Wage. Download guidance about fair piece rates from the DTI website (PDF).

Read the guide on the National Minimum Wage for employers on the DTI website.

If you underpay your workers, they could complain to HM Revenue & Customs, or could take the case to an employment tribunal or civil court.

Subjects covered in this guide

• Introduction
• Issuing pay statements
• Statutory Maternity, Paternity and Adoption Pay
• Statutory Sick Pay
• Guarantee pay
• Complying with the National Minimum Wage
• Rates and calculation of the National Minimum Wage
• Paying workers holiday pay
• Making deductions
• Calculating final pay

 Print This Page

Source - Business Link; Crown Copyright.