By David Clifton, of thePublican.com's legal team from London solicitors Joelson Wilson
The Government recently published its report on the national minimum wage (NMW), covering the period from April 2000 to April 2001.
Its announcement that, since introduction of the NMW in April 1999, compliance teams have identified nearly £5m in wage arrears, was met with the accusation on Radio 4's Today programme that this was about the same as one City bonus payment. Alan Johnson, the employment relations minister, responded that, in his view, that represented more of a problem with the level of City bonuses than with the NMW.
Nevertheless, the principle of the NMW now appears to have been broadly accepted. The independent Industrial Relations Services' Pay Benefits Bulletin reported that: "A surprising consensus has now emerged, with government, business, unions and academics all sharing the view that there has been no significant adverse impact resulting from the statutory wage floor.
"Almost eight in 10 firms... back the principle of a statutory wage floor. Just four per cent oppose the idea".
So it is, therefore, an appropriate time to summarise the law relating to the NMW.
What is the NMW?
It is the minimum hourly wage that employers must pay their employees, according to the National Minimum Wage Act 1998.
Who sets the levels of the NMW?
The levels are set by the Government following advice from the Low Pay Commission, which has recently been granted permanent status. The commission has recommended that biennial reviews be conducted commencing in 2003.
Does the NMW apply to all employees?
It only applies to people aged 18 or over, but subject to that qualification, all workers who are not genuinely self-employed are entitled to the NMW (whether they are actually paid hourly, weekly, monthly or on an annual or any other basis).
Does it only apply to workers in the UK?
Broadly speaking, yes. It applies to people who work in the UK or who normally do their work in the UK.
However, it should be noted that it does apply to people from overseas who work in the UK for a short time, as well as to people who ordinarily work in the UK even if they are working overseas for a short time. It also applies to workers on a ship registered in the UK or on an off-shore installation in UK territorial waters. It does not apply in the Channel Islands or the Isle of Man.
Is there any exemption for small businesses?
No.
Can employees contract out?
No.
What powers of enforcement exist?
The National Minimum Wage Act 1998 allows for the appointment of enforcement officers to act on behalf of employees and created a number of criminal offences.
Workers have the right to receive the minimum wage and not to suffer any unauthorised deductions. They can enforce these rights in an employment tribunal or civil court.
Who enforces the NMW?
Other than in the agricultural sector (where it is enforced by the government bodies responsible for agriculture matters) the NMW is enforced by the Inland Revenue with a network of compliance teams based in 14 towns and cities throughout the UK. From the year 2000/2001, NMW compliance officers have been permitted to exchange information with their colleagues elsewhere in the Inland Revenue.
Are some trade sectors and geographical areas more prone to complaints than others?
- service industries (with the exception of public services) consistently attract the highest number of complaints, together with the hospitality and retail trade sectors.
- the highest incidence of complaints per head of population is in the North East and Yorkshire/Humberside, with the lowest in London and the South East.
How do you calculate the NMW?
The calculations can appear complex at first sight, with a list of payments to be included, excluded or deducted as the case may be. Such factors as living accommodation provided to an employee also need to be taken into account. For assistance in carrying out the calculations:
- telephone the NMW helpline (0845 6000 678)
- obtain the latest NMW guidance and booklets from the DTI
- log on to the DTI's interactive website at www.tiger.gov.uk which includes a "decision tree" and a "ready-reckoner"
- contact a specialist solicitor in this field of work.
Minimum wage levels
Main (adult) rate (per hour) for workers aged 22 and over
Development rate (per hour) for workers aged 18 to 21 inclusive