Calculating the National Minimum Wage 




There are different methods of calculating hourly pay for the purposes of the NMW (regulation 17, NMWR 15), depending whether a worker is paid:


• a salary;




• according to hours worked (time work); 




• according to output (piece work); or




• unmeasured work (work that is neither salaried nor output work, but where there are no specified hours and the worker is required to work when needed, or when work is available).



The period of time for which the NMW is calculated is called a pay reference period. This is either a month, or any shorter period used to calculate the worker’s pay, such as weekly. 




A worker’s basic pay must comply with the NMW. That basic pay can then be used to produce an enhanced contractual pay rate for different shifts, for example, “time-and-a-half”. However, the enhanced rate, whether described for example, as a “premium”, “overtime”, “anti-social hours” or “weekend” or “public holiday” rate, cannot be used as a basis for working out whether the NMW is being paid, even if the worker never receives only basic pay and always receives the enhanced rate (regulation 10(j), NMWR 15). For example, in Hamilton House Medical Ltd v Hillier [2009] UKEAT/0246/09, care worker Ms Hillier’s basic pay rate was below the NMW, but she was paid “time-and-a-third” for weekday nights and “time-and-two-thirds” for weekend nights. Since she almost always worked nights, her average hourly pay was above the NMW. Even so, as her basic rate of pay was below the NMW, the regulations had been breached.




Any attempt to contract out of the NMW is void and has no legal effect (section 49, NMWA 98). 




Separate payments and allowances can only be added to pay to make up the NMW if they are “attributable to the performance of the worker in carrying out the work” (regulation 10(k), NMWR 15).
In Aviation & Airport Services Ltd v Bellfield [2000] UKEAT/194/00, an employer who unilaterally consolidated an existing contractual attendance allowance into workers’ basic pay to reach the NMW rate carried out an unlawful deduction of wages and breached the NMW regulations.



Any amount taken from wages to fund uniforms, items of clothing, shoes, overalls and so on that the employer requires staff to wear in connection with their job is an unlawful breach of NMW law if it takes pay below the NMW during the relevant reference period (regulation 12(2), NMWR 15). In March 2018, the government named and shamed, among others, restaurant groups TGI Fridays and Wagamama and fashion retailer Karen Millen for underpaying the NMW by requiring staff to fund their own work uniform (including any branded fashion clothing staff are required to purchase at a discount and wear while working). 



Deductions in respect of a worker’s “conduct, or any other event for which the worker…is contractually liable” can be made from wages without infringing the NMW regulations (regulation 12(2)(a), NMWR 15). “Any other event” here means something for which the worker is “responsible”, such as their voluntary resignation, or damage to property. This was established in the following case:


Deductions to repay an advance made under a written agreement for a loan or an advance of wages, or as a result of an accidental overpayment of wages, can also be made without infringing the NMW regulations (regulation 12, NMWR 15).