The National Minimum Wage (the "NMW") came into force on 1 April 1999. We reported in issue 28 on the public consultation exercise carried out by the DTI last September, and the draft regulations as they then stood. The National Minimum Wage Regulations 1999 did not actually receive parliamentary approval until a matter of weeks before they came into force.
Those Regulations and the National Minimum Wage Act 1998 provide the legislative framework for the implementa-tion and enforcement of the NMW. The main changes introduced in the final version of the regulations are the introduction of the new concept of "salaried hours work", removal of the right of any worker to an NMW statement and exclusion of additional categories of workers - such as au pairs, family workers and homeless workers on shelter schemes.
Who is covered?
The NMW applies to "workers". Coverage extends beyond "employees" working under a contract of employment to others who work under contracts to do or perform personally any work or services for other parties except work or services provided for a client or customer of a profession or business.
Those covered by the NMW will include: agency workers, home workers, foreign workers working in the UK, UK workers working abroad and agricultural workers. Those not covered by the NMW will include those under 18, the genuinely self-employed, members of the armed forces, most volunteers, au pairs and family workers. Others not included are the homeless working on charitable schemes providing shelter, workers on placements of up to a year on higher education sandwich courses and workers in the first three weeks of Government or European Social Fund work experience schemes. Likewise, apprentices who are under 26 will not usually be entitled to the NMW during the first twelve months of their apprenticeship.
The NMW is of universal application - geographically, across different employment sectors, across employers of different sizes and for all ages of workers over 26. There are two modified rates: £3 per hour for workers who are 18 or over, but have not reached 22; and £3.20 per hour for certain trainees who are under 22 and in the first six months of a job.
Four types of 'work'
Fundamental to the concept of the NMW is an assessment of the hours for which a worker must be paid the NMW. This may be relatively straightforward, for example, for office workers or hourly paid workers, but is inevitably more complex for commission workers, home workers and care workers. The original draft regulations defined three types of work for this purpose. Those categories have been extended to four in the regulations themselves - with different calculation mechanisms for hours which count for each.
"Time Work" is work that is paid for by reference to a period of time, but which isn't "salaried hours work" (see below) - eg hourly paid workers.
"Salaried Hours Work" is work under an annualised hours contract, is new in the final version of the Regulations and is designed to deal with the difficult issue of term-time working.
"Output work" is work that is paid for by reference to the number of pieces made or processed, or transactions or sales completed, by the worker.
"Unmeasured work" is any other type of work. Included will be work where there are no specified hours and the worker is required to work as and when needed. Examples would include residential care workers and pub managers.
The 'pay reference period'
The pay reference period is the averaging period over which the NMW must be paid for each reckonable hour. The pay reference period is set at one month, except for workers paid by reference to a period of less than a month, for whom the pay reference period is that lesser period. So the pay reference period for a weekly paid worker would be one week.
Hours of work - general principles
The regulations define the type of work-related activities for which the NMW must be paid. Time when a worker is "absent from work" does not count- this includes time spent participating in industrial action. Time spent training is counted for NMW purposes. For "time work" and "salaried hours work", time when a worker is available, at or near a place of work, for the purpose of doing work, and is required to be there, counts as reckonable time. However a worker who by arrangement sleeps where she works can only count hours when she is awake for the purpose of working.
Stand-by or on-call time will therefore probably be covered by the NMW if the worker is required to be on site. Time spent travelling also counts - but only to the extent that it is integral to the job and consists of time when the worker would otherwise be working. For "output work" and "unmeasured work", time spent travelling counts for NMW purposes.
Calculating hours of work
For "time work", the hours subject to the NMW are simply the total number of hours worked in the pay reference period. For the three other types of work, the scheme of the regulations is to provide for a "default" mechanism which applies unless various conditions are met.
For "output work" and "unmeasured work", the default mechanism is the same as the time work mechanism- the total number of hours actually worked. For "salaried hours work", the default mechanism is the annualised number of hours divided by the number of pay reference periods in the year.
The alternative mechanisms for "output work" and "unmeasured work" apply where there are written agreements in place setting out estimates of, for "output work", the working hours in the pay reference period, and, for "unmeasured work", the average daily hours carrying out contractual duties.
These averaging mechanisms are used to calculate the "ascertained hours" to be worked in the pay reference period.
The alternative mechanism for "salaried hours work" applies where the basic hours are exceeded in a pay reference period.
The mechanism involves a hybrid of the default mechanism and the actual hours worked.
Pay counting towards the NMW in a pay reference period
The starting point is gross pay in that reference period, and gross pay in the next reference period in respect of the period under consideration. Various payments are excluded-eg loans, advances of wages, redundancy payments and pension payments.
Various items are then subtracted: pay for absences and industrial action, payments included in earlier reference periods, premia pay-ments, unconsolidated allowances, tips not paid through the payroll, expenses, living accommodation in excess of £19.95 per week, employment-related expenses and deductions for the employer's own use.
Certain payments then have to be added back in to arrive at the pay for NMW purposes. These include overpayments, amounts for the purchase of shares and accommodation costs over £19.95 per week.
Record-keeping requirements
The employer has to keep sufficient records to establish that it is paying workers at least the NMW. Training, fair estimate and daily average agreements must be kept. Records must be kept in a single document for each pay reference period, and must be kept for three years.
A worker who on reasonable grounds suspects that she is not being paid the NMW can require her employer, on 14 days' notice to produce those records. The sanction for failure is currently £288, enforceable in a Tribunal.
Enforcement
The burden of proof in establishing whether the NMW has been paid lies with the employer. The NMW itself can be enforced by workers, through claims based on an implied contractual right to be paid at least the NMW, and is treated as an unlawful deduction under Part II of the Employment Rights Act 1996 (the old Wages Act).
Enforcement officers can also impose a penalty of twice the hourly rate of the NMW per worker per day of non-compliance. There are also six criminal offences created by the NMW Act.
Anti-victimisation provisions are wide ranging. A worker is protected from being subjected to any detriment for enforcing a right to the minimum wage including simply qualifying for it.
If an employee is dismissed because they qualify or might qualify for the minimum wage, it will automatically be an unfair dismissal and there is no qualifying service requirement to gain this right.