A Jargon Free Guide To Calculating The National Minimum Wage

Date Added 01.04.16

As from 1st April 2016, the National Living Wage (NLW) will apply to all workers aged 25 and over. But how do you calculate it, if your workers don’t work regular hours, or are paid more than their basic pay rate? Our guide is HeRe For You!

Workers Who Receive Bonuses:

If you pay a worker a bonus and they receive it within a specific pay reference period, i.e. the period of time your workers are paid for e.g. monthly, fortnightly, or weekly, then it will count towards the NLW. However, circumstances may arise where a proportion of the bonus can count towards the payment received in a previous pay reference period.

For instance, if you decide to pay an annual bonus in April, but the pay reference period is in one month’s time, then you can calculate 1/12th of the bonus towards the NLW for March and the rest of the bonus can be calculated for NLW in April.

Workers Who Are Paid Based On A Time Sheet:

Hours recorded on a time sheet will generally count towards the minimum wage for the pay reference period, in which the worker worked the hours stated. So if the workers are paid weekly based on their timesheets, the pay reference period is one week and the workers should therefore be paid not less than the NLW for the hours worked that week.

If a worker submits a late time sheet, then you will have until the end of the following pay reference period e.g. the end of the following week, fortnight or month etc. to pay that worker.

Workers Who Receive Overtime Or A Shift Premium:

If you engage a worker at a higher rate than their standard rate of pay, for any overtime they may work, if they work on a bank holiday or if they work on a night shift for example, then the amount that their higher rate of pay exceeds their standard rate of pay does not count towards minimum wage pay.

To calculate this premium rate where the same basic pay rates apply to all of the work done by a worker within a pay reference period, i.e the period of time your workers are paid for e.g. monthly, fortnightly, or weekly:

  • Assume that the worker has only been paid their basic rate for all of the hours they have worked in that period;
  • Multiply the hours they have worked by their basic rate;
  • Minus that total from the total amount that the worker actually received for the hours they have worked in that period;
  • The remainder does not count towards NLW.
  • The basic pay rate should therefore be no less than the NLW for workers over the age of 25.

Workers Under 25:

The same rules apply, but they should get no less than the National Minimum Wage for their age.

Need some advice?

Talk to Tollers! We are HeRe For You.

Tollers’ Employment Law Team are here to help should you have any queries regarding the above calculations, do not hesitate to contact us on 01604 258558.

All things Tollers

We partner with...

Headway Accreditation 2024
SIA Business Member Badge
Santander Logo
Barclays Logo
Sports Aid Logo
Harlestone Park Logo
NGC logo
Northamptonshire County Cricket Club Logo
Legal Fees Insurance Logo