National minimum wage and other statutory payments
The NMW rates applicable from April 2018 are as follows:
25 and over: £7.83 per hour
21 or over: £7.38 per hour
18 – 20: £5.90 per hour
16 – 17: £4.20 per hour
Qualifying apprentices: £3.70 per hour
In general any costs which the employee HAS to pay to the employer during the course of his employment will count towards a reduction in the hourly rate, and if this results in a net rate of less than the NMW, it will breach NMW regs. It is illegal to count tips or service charges as a part of the NMW.
Tips, gratuities etc cannot be used to show compliance with NMW, neither should overtime or shift allowances, benefits in kind or contractually required deductions for tools/uniform etc (though overpayment deductions will not affect the NMW). It is permissible to make an adjustment for accommodation, but only to a point – at the time of writing this is a maximum of £7 per day or £49 per week (April 2018). There are special rules for the treatment of working time when employees are travelling, training or on call. These complex arrangements are outside of the scope of this article and employers should contact us for further advice.
The National Minimum Wage applies to commission-based and piece workers. The worker must have earned, on average, at least the NMW for the pay reference period. The pay reference period depends on the frequency of wage payments to the worker, so for a daily paid worker it is one day, for a weekly paid worker, 1 week, a monthly paid worker, 1 month.
From April 2018 £145.18 per week. Remember that the first 6 weeks of materity or adoption pay are paid at 90% of normal earnings, and the remaining weeks are paid at the statutory rate, or 90% of lower earnings whichever is the lower.
With effect from Feb 2018 the SRP is £508 per week (or actual contractual earnings if lower). A maximimum of 20 years service can be counted for the purposes of redundancy pay.
Employees must have 2 years continuous service to qualify for a statutory redundancy payment.
Statutory redundancy entitlement varies by age and service as follows: half a week’s pay for each complete year of employment below the age of 22; a full week’s pay for each year between 22 and 40; a week and a half’s pay for each year above the age of 41. A maximum of 20 year’s service is taken into account, so the maximum SRP payment would be 20 X 1.5 X 508 = £15,240.
Regular commission should be included in a week’s pay, but overtime pay is not unless it is contractually required. If earnings vary each week, an average of the 12-week period leading up to the redundancy is used.
The first £30K of redundancy pay can be paid free of tax, but notice pay is taxable and subject to normal deductions.
All employees are entitled to Statutory Sick Pay (SSP) subject to certain qualifications, including whether the employee’s earnings are at or above the National Insurance Lower Earnings Limit (LEL).
SSP is normally paid for 28 weeks in any 3 year period. There are certain qualification requirements for SSP, as follows:
- SSP is only paid after 3 days of sickness absence. There is no right to SSP in the first 3 days of absence;
- the employee must provide evidence that he cannot work because of his sickness. Normally that evidence is a "self certificate" of absence for absence of up to 7 days or a doctor's certificate after the first 7 days.
Statutory guarantee pay must be paid to employees for up to a weeks’ work (max 5 days, pro rata for part time employees) in a 3 month period. It applies to employees with normal contractual working hours and excludes casual workers. An employee must have a month’s service to qualify. The employer might not be able to provide work for example because of a natural event (heavy snow or floods) or a power cut etc. Normally an ‘occurrence’ of some kind or other is required to generate the right to guarantee payments. At the time of writing, guarantee payments are limited to £28 per day, or £140.00 in 3 months. Guarantee pay should be expressly permitted by the worker's contract of employment.