2. What is and is not included in the NMW calculation?

The National Minimum Wage Act 1998 (NMWA), and the National Minimum Wage Regulations2015 (NMWR) specify how the NMW should be calculated, including what can and cannot be included in the payment. The NMW is calculated by looking at average gross pay over a fixed period known as the pay reference period. This chapter covers what can be counted as gross pay and how to calculate the total time worked in order to ascertain whether workers are getting their full entitlement.

There are four key questions to consider:

• Does the worker have the right documents? Employers are legally obliged to keep NMW compliance records and workers have a right to see them on request.

• What is the pay reference period? For workers paid weekly or monthly, the NMW is calculated over this pay reference period. It’s different if they receive an annual salary or are paid for piecework.

• What is their gross pay during this period? Not all types of pay can be included in NMW calculations.

• What hours have they actually worked? What counts as working time under the NMW — for example, are “sleeping in” and travel time included?