Outlook video: National minimum wage

XpertHR's head of content Jo Stubbs and senior employment law editor Clio Springer discuss the national minimum wage. 

 

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The questions in full:

The national minimum wage rises on 1 October 2011. What is the new rate?

The main rate, for workers aged 21 or over, goes up to £6.08 an hour. The rate for workers aged at least 18 but under 21 rises to £4.98 per hour. The rate for workers under 18 who are no longer of compulsory school age rises to £3.68 per hour. Finally, the apprentice rate rises to £2.60 per hour. These rates are effective for pay reference periods starting on or after 1 October 2011. 

What is a pay reference period?

This is the period between pay dates. If the worker is paid every month or less frequently (for example quarterly), the pay reference period will be one month. If the worker is paid more often, the pay reference period will be the amount of time between pay dates, for example one week. 

What happens if 1 October 2011 falls within a worker's pay reference period?

The hourly rate at which a worker is entitled to be paid in respect of any pay reference period is the one in force on the first day of that period. This means that, where a pay reference period begins before 1 October 2011, the old rate of the national minimum wage will be the one to which the worker is entitled for that reference period only. 

Can accommodation provided to employees be taken into account when calculating payment of the national minimum wage?

Yes. If the employer provides a worker with housing as part of the job, a daily accommodation offset can be taken into account for the purposes of calculating whether or not the national minimum wage has been paid. 

Does this daily accommodation offset change on 1 October too?

Yes. The daily accommodation offset rises to £4.73 on 1 October 2011. 

If an employer provides other benefits in kind such as meals or luncheon vouchers, can it offset these against its obligation to pay the minimum wage?

No benefits in kind, other than accommodation, count towards the national minimum wage. This means that, although an employer may offer benefits such as meals, luncheon vouchers, childcare vouchers and medical insurance, it will not be able to count their value, or notional value, towards its obligation to pay the national minimum wage. 

Can employers use tips to count towards payment of the national minimum wage?

No. A change to the legislation in 2009 made clear that tips, service charges, gratuities and cover charges can no longer be used to make up the national minimum wage. 

Does that mean that employers are obliged to pass on the full value of all tips to employees?

No. There is no obligation on employers under the national minimum wage legislation to ensure that employees receive the full value of any tips paid by customers. However, they cannot use tips towards their obligation to pay the minimum wage. 

There have been press reports about interns working for nothing. Should employers be ensuring that they receive the minimum wage?

Section 1 of the National Minimum Wage Act 1998 provides that workers are entitled to be paid the national minimum wage provided that they have reached school-leaving age and work, or ordinarily work, in the UK. Therefore, the key question is whether or not an intern meets these criteria; the main issue being whether or not the intern qualifies as a "worker". A worker is an individual who works under any contract, whether express or implied and, if it is express, whether oral or in writing, whereby he or she "undertakes to do or perform personally any work or services for another party to the contract", where that other party is not a client or customer of a business carried on by the individual. 

Therefore, where, under an agreement with the organisation, the intern undertakes to work for it personally, the definition is likely to be satisfied and the intern will be entitled to the national minimum wage. However, if the intern is only observing or shadowing employees of the organisation, without undertaking any actual work, he or she is unlikely to be a worker and will, as a result, not be entitled to the national minimum wage. 

 

XpertHR employment law manual

The XpertHR employment law manual sets out the law on the national minimum wage. 

 

National minimum wage: FAQs

We provide the answers to employers' questions on the national minimum wage, including: 

For the full range of FAQs on the national minimum wage, visit the XpertHR FAQs section

 

Worked examples

The XpertHR worked examples section provides calculations of the national minimum wage for different scenarios. 

 

Policies and documents

The XpertHR policies and documents section provides a model letter providing a national minimum wage statement

To view all the model documents on XpertHR, visit the XpertHR policies and documents section