National Minimum Wage Act 1998

Quick Summary
• ALL workers have the right to inspect their pay records if they suspect national minimum wage underpayment.
• Employers must provide relevant records upon request or face penalties.
• Non-compliance can lead to fines of up to 80 times the hourly National Minimum Wage.
• Our real-life example shows how easily you could fall foul of the rules.
• Ensure compliance by adjusting pay based on the number of working days each month.

National Minimum Wage Act 1998
We will all be aware of the National Minimum Wage Act 1998 (NMWA) legislation that surrounds paying workers at least the National Minimum Wage (NMW) for the hours they work, but in actual fact, how many of us actually realise the intricates of being compliant and the rights the legislation provides to workers?
To provide more context, S10 of the NMWA provides the right for a worker to inspect pay records where they believe on reasonable grounds that, they are or have been incorrectly remunerated by their employer, at a rate which is less than the national minimum wage. Not only that, but a worker also has the right to examine the pay records and, at the same time, be accompanied by any such other person as they may think fit.

But what does that mean for employers?

These rights are only exercisable by a worker where the worker gives the employer the required notice (a “production notice”) requesting the production of any relevant records relating to the period as described in their notice. If a production notice is given, the employer should provide the worker reasonable notice of the place and time to which the relevant records will be produced. There are clear stipulations in the legislation of where these records must be produced and the timeframe for the same (within 14 days or at such later time that may be agreed within that period between the worker and employer).

Compliance
It may seem like a simple task to comply with the legislation but if you do not, the sanction is remarkable. Section 11 of the legislation details that where an employment tribunal finds a complaint under this section well-founded, the tribunal shall make an award that the employer pays to the worker a sum equal to 80 times the hourly National Minimum Wage rate in force at the time of any such award. This is significant and therefore it is paramount to ensure you are compliant!

Example
Josie is 21, works full time at 37.5 hours per week and is paid an annual salary of £22,308.00. The payroll team divide this annual salary into equal monthly instalments at £1,859.00. Across the year, the working days every month vary from 20 days to 23 days. Can we assume that Josie is being paid at least the National Living Wage for the months where she works for 22 days?

Let’s have a look:-

Josie’s Day Rate: £11.44 per hour X 7.5 = £85.80
Josie’s Paid Monthly Salary: £1,859.00
Josie’s Monthly Salary (based on 22 working days): £1,887.60
£1,859.00 / 22 working days = £84.5 / 7.5 hours = £11.27 per hour

Based on the above, you can clearly see that as Josie’s employer, you would not be compliant with the National Living Wage for that pay reference period. As an employer, you should ensure that you pay employees, paid at that statutory minimum rate, as per the number of working days in a month to ensure that you are compliant!

If you require any HR support or have any queries, please do not hesitate to get in touch with us here at Tamar HR!

info@tamarhr.co.uk / 01752 686570 / www.tamarhr.co.uk