What is the National Minimum Wage?

The National Minimum Wage is the minimum amount which a worker, who qualifies for the National Minimum Wage, should be paid. The National Minimum Wage was created by the National Minimum Wage Act 1998. Since the Act was passed certain other Regulations have been made in relation to the National Minimum Wage.

Who is entitled to be paid the National Minimum Wage?

A person qualifies for the National Minimum Wage if he is an individual who is a worker, he is working, or ordinarily works, in the United Kingdom under his contract, and has ceased to be of compulsory school age. The person does not have to be an employee and the definition of a worker is very wide. Most workers will qualify for the National Minimum Wage.

Although the National Minimum Wage Act 1998 applies to most workers, the Act contains special provisions relating to certain types of workers. These are as follows:

  • agency workers;
  • home workers;
  • persons employed by the Crown;
  • members of the House of Lords staff;
  • members of the House of Commons staff;
  • mariners;
  • individuals who are not otherwise “workers”; and
  • persons in offshore employment.

Who is not entitled to be paid the National Minimum Wage?

The Minimum Wage Act 1998 specifically excludes the following workers:

  • share fishermen;
  • voluntary workers;
  • resident workers in religious and other communities;
  • prisoners;
  • members of the armed forces; and
  • persons detained in removal centres under the Immigration and Asylum Act 1999.
  • The Minimum Wage Act 1998 gives the Secretary of State the power to, by passing further regulations, exclude certain other classes of people from the entitlement to the National Minimum Wage. As at June 2010 the following persons are excluded under such regulations:
  • students doing work experience as part of a higher or further education course where the work experience doesn’t last longer than a year;
  • apprentices under the age of 19;
  • apprentices over the age of 19 who are in the first year of their apprenticeship;
  • persons taking part in certain government schemes (for example Entry to Employment, Programme Led Apprenticeships and Skillbuild);
  • homeless workers who are provided with shelter and other benefits;
  • persons taking part in certain government employment programmes which provide training or work experience to job seekers; and
  • persons taking part in certain European Community programmes (for example Youth in Action).

Can an employer contract out of the National Minimum Wage Act?

If a worker qualifies for the National Minimum Wage he must be paid at a rate not less than the National Minimum Wage irrespective of what his contract of employment says. Any provision in a contract of employment which purports to exclude or limit the operation of any provision of the National Minimum Wage Act 1998 is void. As is any provision which purports to preclude a person from bringing enforcing his right to be paid the National Minimum Wage.

How much is the National Minimum Wage?

The National Minimum Wage is an hourly rate, which from time to time, the Secretary of State may prescribe. 

The rates changes fairly often. The rates are currently as follows: 

  • £5.80 for workers over the age of 22;
  • £4.83 for workers aged 18 to 21;
  • £3.57 for workers under the age of 18.  

From 1 October 2010 the following new rates and ages bands will apply: 

  • £5.93 for workers aged 21 and over;
  • £4.92 for workers aged 18 to 20;
  • £3.64 for workers aged 16 or 17. 

A new minimum wage of £2.50 per hour will apply from 1 October 2010 for apprentices who are either under the age of 19 or in the first year of their apprenticeship.

How can it be determined whether the National Minimum Wage has been paid to a particular worker?

Calculating whether the National Minimum Wage has been paid to a particular worker is a fairly complex matter. The National Minimum Wage Act 1998 sets out the method which should be used to determine whether the National Minimum Wage has been paid.

Does a worker who is entitled to be paid the National Minimum Wage have any other rights under the National Minimum Wage Act?

Where a worker qualifies for the National Minimum Wage they have the right not to be subjected to any detriment for taking, or proposing to take any action to enforce or otherwise secure the benefit of their right to be paid at a rate which is not less than the National Minimum Wage. If they are dismissed on this basis their dismissal will be treated as an unfair dismissal. 

A worker who qualifies for the National Minimum Wage has the right to inspect certain records which his employer is required to keep relating to the National Minimum Wage. If the employer fails or refuses to allow access to such records the worker may present a complaint to an employment tribunal.

What can a worker who is entitled to be paid the National Minimum Wage but is paid a lower amount do?

If a worker qualifies for the National Minimum Wage but is paid at a lower rate they can apply for their right to be paid the National Minimum Wage to be enforced by making an application to an employment tribunal.

What is the penalty for failing to pay the National Minimum Wage?

If the employer of a worker who qualifies for the National Minimum Wage refuses or wilfully neglects to pay the worker at a rate which is at least equal to the National Minimum Wage, that employer commits a criminal offence which is punishable by a fine and/or imprisonment.