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Employers and the National Minimum Wage rules: don’t get caught out

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Falling foul of the National Minimum Wage and Living Wage rules is all too easy, and for most employers, it’s an innocent oversight that will catch them out.

Compliance with the National Minimum Wage and Living Wage rules is an area that attracts much attention from HM Revenue & Customs (HMRC). In the event of an HMRC enquiry, this could not only cause financial damage to an employer but also harm its reputation. It’s therefore vital that employers review primary risk areas and check for potential problems.

I have summarised below some of the most common risks according to HMRC and advisors.  

Salaried workers

Just receiving a ‘salary’ doesn’t make an employee a salaried worker. Various conditions apply, including the need for basic annual hours to be specified or ascertainable from the employment contract, and there being no entitlement to other payments (apart from a performance bonus) for those hours.

If these conditions are not met then the employee isn’t a salaried worker and the ability to average their pay for National Minimum Wage and Living Wage purposes over each pay reference period is lost. This means that each pay reference period then needs to be considered in isolation and creates the possibility that an employee who works a large number of hours in one period (e.g. a month), could, if they receive the same amount of pay for it as for any other, find that they have been paid at less than the appropriate hourly rate. That creates a breach of the rules!


When employees move from one age grouping to another, employers may miss that they have become entitled to a higher National Minimum Wage/Living Wage rate.

Pay that doesn’t count

Various components of a remuneration package don’t count: this includes overtime, shift premium, tips and gratuities.

The impact of deductions

Certain deductions from pay, even where applied for the benefit of employees, may cause a breach of the National Minimum Wage rate. Having to contribute for uniform or equipment is one example.


Accommodation has its own set of rules. Whether employees are provided with accommodation free of charge, or are charged a rent, the value that an employer needs to take into account for National Minimum Wage/Living Wage purposes is fixed by reference to the accommodation offset allowance, currently £7.55 per day.

Time spent

Travelling, training, handing over responsibilities when shifts start/end and going through security procedures are all classed as time that may be taken into account and reduces the hourly average pay for National Minimum Wage/Living Wage purposes.

Need help?

Make sure you don’t fall foul of the National Minimum Wage and Living Wage rules by something that could have been easily avoided. If you need any further help, please contact us.

Call 0330 024 0888 or email


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Larking Gowen

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