Q: Minimum wage

You can get more information from the national minimum wage page on the HMRC website.

Yes. There are certain types of workers who do not qualify for the NMW. For example, those who are self employed, students working as part of their higher education course, or workers on certain training schemes.

If you are unsure about an employee's eligibility, please contact the HMRC.

Yes. Workers who are working legally in the United Kingdom are entitled to be paid at least the minimum wage for the hours they have worked whilst in the UK.

You do not have to use the software to perform a minimum wage check. However, employers have a statutory obligation to ensure all eligible employees receive a minimum wage. Therefore, using Payroll makes it easier for you to meet this obligation.

If you do not want to perform this check:

1. Company > Legislation > Minimum Wage.
2. Select the 'I want to opt out of Minimum Wage validation' check box.

Firstly, you must include the default rate and hours/no details of the existing payments & deductions you want to use in the minimum wage check. For more information, see Managing your payments and Managing your deductions.

Next, record which employees are included in the minimum wage check, including those employed as apprentices. See Assigning payments to employees.

Yes. A worker might be paid at a higher rate for working at a particular time, for example, working overtime, weekend or night shifts. If so, the premium element, which is above the normal rate, should not be included in the minimum wage check.
For example, if an employee works overtime that is paid at 1.5 times their basic rate, the basic part of the overtime payment (1) should be included, but the premium (0.5) should not.

The guidance on the minimum wage can be complex. For more information, please visit the Department for Business Enterprise & Regulatory Reform website at www.berr.gov.uk.

If the software has been set up correctly, the minimum wage check is performed when you process your payroll, using the Enter Payments option.

If an employee's salary is below the specified minimum wage, you will be prompted to make an adjustment when you click Save/Next in the Enter Payments window.

Please note the following:

• You can only adjust payments that have been set up with a status of Variable.
• To ensure the minimum wage calculation is performed correctly, the payment you adjust must have the same rate recorded in both Enter Payments and the Employee's Record. If these values are different, your employees may not be paid correctly.
• If the payment you want to adjust is used as a base for any factored payment, this part of the factored payment is also adjusted automatically. See Maintaining factored payments.

For more information, see Paying the minimum wage.

An employee, who has just turned 18, is included in the minimum wage check and has two pay elements: Basic and Bonus. The Hours and Rates for Basic are selected to be included in the minimum wage, however only the Rate for Bonus is included. This employee works the following hours at the given rates:

• Basic: 35 hours @ £3.40 = £119
• Bonus: 1 hour @ £30 = £30

Therefore, the employee's total gross pay for minimum wage is £149 and he has worked a total of 35 hours.

Your software checks if the employee's average hourly rate is equal to or above £4.92, the current minimum wage rate for an 18 year old. To do this it divides the total gross pay that is subject to the minimum wage check by the total hours worked against the payments subject to the minimum wage check. In this example, this is 149 divided by 35, giving 4.2571, which is below the minimum wage rate for an employee of this age.

On clicking Save/Next or Close in Enter Payments, a message appears advising you of this and prompting you to adjust a pay element so that the employee is paid the correct amount, which the software has calculated as 35 @ £4.92 = £172.20.

Assuming that you choose to adjust Basic, his minimum wage pay must be increased by £23.20. This is divided by the number of hours he has worked to give the amount that the Basic rate must be adjusted by; in this case this is 23.20 divided by 35, giving £0.6629 per hour. Your software automatically increases the Basic rate by adding £3.40 and £0.6629, which equals £4.0629. This means his pay is now:

• Basic: 35 hours @ £4.0629 = £142.20
• Bonus: 1 hour @ £30 = £30

This gives a total of £172.20, which is the minimum amount that this employee can be paid according to National Minimum Wage legislation.

A second employee, aged 25, is included in the minimum wage check and has two pay elements: Basic and Overtime (1.5). The Hours and Rates are included in the minimum wage for both pay elements. The Overtime (1.5) pay element is set up as a Factor with a Multiplier of 1.5 times the base payment rate, and Basic is the base payment and the This payment includes a premium element check box is selected.

This employee works the following hours at the given rates:

• Basic: 35 hours @ £5.00 = £175
• Overtime (1.5): 10 hours @ £7.50 = £75

As the Overtime has a premium element, this must not be taken into account when calculating the minimum wage gross pay. The premium element for Overtime (1.5) is £2.50, which means that this employee has a premium amount of £25, and the employee's gross pay for the minimum wage is therefore £225.00 and he has worked a total of 45 hours.

Your software checks if the employee's average hourly rate is equal to or above £5.93, the current minimum wage rate for a 25 year old. To do this it divides the total gross pay that is subject to the minimum wage check by the total hours worked against the payments subject to the minimum wage check. In this example, this is 225 divided by 45, giving £5.00, which is below the minimum wage rate for an employee of this age.

On clicking Save/Next or Close in Enter Payments, a message appears advising you of this and prompting you to adjust a pay element so that the employee is paid the correct amount. The software has calculated this as 45 @ £5.93, plus the £25 premium element, which equals £291.85.

Assuming that you choose to adjust Basic, the minimum wage pay must be increased by £41.85, excluding the premium element.

As Overtime (1.5) is a factor of Basic, when Basic is adjusted then Overtime (1.5) is also automatically adjusted. The software takes this into account when calculating the amount to adjust Basic. It does this using the following steps:

Multiply the number of hours of the factored pay element by its multiplier: 10 x 1.5 = 15

Repeat step 1 for every factored element and add the totals together: 15 (as there is only one factored pay element)

Add the total from step 2 to the number of hours against the payment being adjusted: 15 + 35 = 50

Divide the required pay increase by the result of step 3 - this is the rate increase for the payment being adjusted: £41.85 / 50 = 0.837

The employee's pay now becomes:

• Basic: 35 hours @ £5.837 = £204.30
• Overtime (1.5): 10 hours @ £8.7555 = £87.56

This gives a total of £291.86, which satisfies the required minimum amount that this employee can be paid according to National Minimum Wage legislation.