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The NMW and NLW rates applicable from April 2023 can be found in our Employment law fact card.
In general any costs which the employee HAS to pay to the employer during the course of their 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 £9.10 per day or £63.70 per week (April 2023). 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 2021 £151.97 per week. Remember that the first 6 weeks of maternity or adoption pay are paid at 90% of the employee’s average weekly earnings, and the remaining weeks are paid at the statutory rate, or 90% of the average earnings whichever is the lower.
With effect from April 2023 weekly pay for the purpose of calculating redundancy pay is £643 per week (or actual contractual earnings if lower).
Employees must have 2 years continuous service to qualify for a statutory redundancy payment.
Statutory redundancy entitlement varies by age and service as follows:
A maximum of 20 year’s service is taken into account when calculating statutory redundancy pay, so the maximum SRP payment would be 20 X 1.5 X 643* = £19,290.
*as of April 23
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 up to 28 weeks in any 3 year period. There are certain qualification requirements for SSP, as follows:
Statutory guarantee pay (SGP) is an amount payable to employees who are not provided with work by their employer (on a day they would usually work under their contract) in specific circumstances.
SGP is usually used for employees being placed on lay-off or short-time working.
SGP 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.
As of April 2023, guarantee payments are limited to £35 per day for 5 days in any 13 week period, so a maximum of £175.00.
Employees who usually earn less than £35 will get their usual daily rate.
If employees work part time, their entitlement is worked out in proportion to their part time hours.
Guarantee pay should be expressly permitted by the worker’s contract of employment.