Do I have to pay the National Minimum Wage?

The National Minimum Wage is a legal requirement that sets the minimum hourly rate you are required by law to pay your employees. 

Almost all workers are entitled by law to be paid no less than the National Minimum Wage. If you employ staff, you’ll need to pay your workers at least the legal minimum.

The minimum wage rate depends on several factors, including the worker’s age. From April 2024 the National Minimum Wage rate per hour is:

• £11.44 for workers aged 21 and over
• £8.60 for workers aged 18 to 20
• £6.40 for workers under 18
• £6.40 for apprentices aged under 19 and those aged 19 or over who are in their first year.

Most workers are entitled to the minimum wage. This includes part-time staff, casual labourers (eg someone hired for one day), agency workers, homeworkers, workers paid by the number of items they make, apprentices, trainees and workers on probation.

There are no exemptions for small employers.

The table below lists the different types of employee and entitlements.

The national wage increases on a yearly basis. The table below shows by how much the NMW has increased over the past few years for workers over the age of 25.

Clauses in employment contracts that breach statutory regulations are not legally binding. Therefore if your contract offers a payment below the national minimum wage, even if your employee signs it, you are in breach of the regulations and your employee can make a claim against you.

Workers aged 21 and older are entitled to receive the National Living Wage at £11.44 an hour. The minimum wage will still apply for workers aged 20 and under. The government is committed to increasing this every year.

Employers must ensure they are paying their staff correctly; the National Living Wage is enforced as strongly as the National Minimum Wage.

When calculating the time spent at work, you should include time spent travelling between work assignments, and time spent training. You should exclude time spent travelling between home and work and time away from work on breaks, holidays, sick leave and maternity leave.

For staff who are paid by the hour, the calculation of National Minimum Wage must be worked out over the period covered by each pay packet (e.g weekly or monthly) based on actual hours worked.

For salaried staff, the calculation of National Minimum Wage is based on the number of hours set out in the worker’s contract of employment. The employer must also pay at least the minimum wage for any hours worked in addition to what’s agreed in the worker’s contract.

For workers who are paid for each piece of work they complete, their pay can be based either on the actual hours worked or on the basis of a ‘fair rate’ for each piece of work completed. This ‘fair rate’ is the amount that allows an average worker to be paid the minimum wage per hour if they work at an average rate. This needs to include an allowance so that new workers (who will be slower than more experienced workers) are not disadvantaged.

Basic salary, bonus, commission and other incentive payments based on performance, all count towards National Minimum Wage as does, in some circumstances, an accommodation allowance. There are a number of elements of pay that do not count including pension payments or benefits in kind such as private medical insurance or other benefits (except an accommodation allowance); any extra pay for overtime or shift work. Only the basic rate of pay is taken into consideration for overtime worked; expenses; and any allowances or payments that are not attributable to their performance and is not part of their basic salary, for example an additional element of pay that is for London-weighting or an on-call allowance. 

How do I calculate the hourly rate? 

• Step 1 Check their contract what does it say are their weekly annual hours. Input annual hours into calculator
• Step 2 If they are paid in 12 monthly instalments divide their annual number of hours by 12, if they are paid 13 times a year then divide it by 13. This gives the average number of hours paid for each payment cycle
• Step 3 Divide the amount of money they get in each pay month by the average number of hours worked each month. This gives you the hourly rate.