Working out NMW for the different categories of work

The NMWA provides four different types of work namely: time work; salaried hours work; output work; and unmeasured work. This article will explore some of the different rules applicable, as mentioned in the previous article.

Time work
Time work occurs where a worker is not paid an annual salary but is only paid according to the number of hours spent working/ working time. Workers/ Employees paid an hourly rate fall into this category.

Working time is the number of hours worked by a timed worker and consists of the hours actually worked. Time spent absent from work, rest breaks and time spent taking part in industrial actions are not included.

In addition, working time will include the time when a worker is available at or near a place of work for the purpose of working or being required to work. The exceptions are:

  • where the worker's home is at or near the place of work and the time is time which the worker is entitled to spend away from work, at home; and
  • where a worker sleeps by arrangement at or near the place of work and provided with suitable facilities for sleeping. Timed work will only be included if the worker is required to be awake for the purpose of working.

In Scottbridge Construction Ltd v Wright a night watchman was required to be onsite between 5pm and 7am and he was generally only required to work for four hours between 5 to 6pm, 11pm to 12am and 5am to 7am. Outwith these timeslots, he was not required to work and could sleep, watch television or do anything else he wanted. The Court of Session decided that for NMW purposes, he was working the entire time between 5pm and 7am as the nature of his work required him to be onsite the whole time.

Time spent travelling for business during working hours is included as timed work as well as time spent attended training during working hours.

The method for calculating NMW will be as mentioned in the above article i.e. if they are paid weekly, then their total salary that week is divided by the numbers worked that week. The figure should therefore be at or above the NMW rate.

Salaried work
This is based on paying the worker an annual salary in equal instalments on a weekly or monthly basis for a basic, fixed number of hours in a week or month.

Working time is the number of hours worked by a salaried worker and consists of the hours actually worked. Time not spent actually working include: receiving less pay than normal e.g. unpaid leave or sick leave only when statutory sick pay is paid; travel between home and work; and industrial action.

In addition, working time will include the time when a worker is available at or near a place of work for the purpose of doing salaried work and required to be available for such work. As with timed work, the exceptions are:

  • where the worker's home is at or near the place of work and the time is time which the worker is entitled to spend away from work, at home; and
  • where a worker sleeps by arrangement at or near the place of work and provided with suitable facilities for sleeping, the hours will only be included if the worker is required to be awake for the purpose of working.

For example, in City of Edinburgh Council v Lauder (2012), the Sheltered Housing Residential Wardens were provided with 'tied accommodation', working their core hours under contract between 8.30am to 5.30pm, Monday to Friday. For four nights a week, the Wardens were also required to be 'on-call' between midnight and 8.30am at their 'tied accommodation'. The Employment Appeal Tribunal held that 'on-call' hours did not form part of the Wardens' core hours and did not attract NMW except for the hours actually awake to do work during the 'on-call' hours.

This decision can be contrasted with the 2014 case of Esparon (t/a Middle West Residential Care Home) v Slavikovska where Miss Slavikovska employed as a senior care assistant was contracted to work 35 hours a week on a rota basis, Monday to Friday. She was sometimes required to work night shifts on an 'on-call' or 'sleep-in' basis, with most of the work being carried out between 9pm and 10pm and 7am to 9am. Her employer contended that for the rest of the time, she was allowed to sleep and was only there for emergency purposes. The Employment Appeal Tribunal in London held that although sleeping facilities were provided, she actually worked and carried out duties during the 'sleep-in' sessions and was required to do so. As such, this shift attracted NMW which she was not paid as she only received £25 for the night shifts.

Time spent travelling for business and attending training during normal working hours is considered working time. In addition, working time includes being absent if normal pay is received such as rest breaks, holidays and sick pay.

The following method can be used to work out if NMW is paid (based on an annual salary of £15,000 being paid in monthly instalments of £1,250 to a worker who is 21 years old):

1. Calculate the workers' basic annual hours e.g. 2,080 hours
2. Divide 2,080 hours by 12 months = 173.3 hours a month
3. Divide £1,250 (monthly wage) by 173.3 hours a month = £7.21 an hour

The current NMW rate for a worker over 21 is £6.31. The worker is therefore being paid above NMW at a rate of £7.21 per hour.

Someone working annualised hours is a subset of salaried workers. This is where a worker is guaranteed a fixed amount of hours in a year but could be working more hours one month and less the next. Typical examples include seasonal work such as agricultural work, estate work and hospitality.

The method for calculating NMW is similar to the method for working out NMW for a salaried worker based on £17,000 for the fixed amount of hours to be worked over the year (e.g. 2,080 hours):

£17,000 divided by 2,080 = £8.17 an hour

The current NMW rate for a worker over 21 is £6.31. The worker is therefore being paid above NMW at a rate of £8.17 per hour.

However, where hours are not ascertainable or recorded, the hours worked in each month (pay reference period) may be used to calculate whether NMW has been paid. This can have financial consequences particularly in seasonal work such as agriculture when hours worked in certain months may mean a worker for that month doesn't receive the NMW and could bring a claim for unlawful deduction of wages and/or report the employer to HMRC. As such, it is important that the contract of employment and records reflect the annualised hours.

Output work
This is paid based on the worker's productivity for instance piece work and commission-based work and should be paid in one of two ways. The first is to pay workers NMW for every hour worked and therefore does not take into consideration the number of items produced or tasks completed.

Alternatively, the employer may decide to pay a "fair piece rate" instead of NMW in which case there are a number of conditions which must be met. Firstly there is no minimum or maximum number of hours to be worked in the contract. Secondly, the employer generally has no control over the hours worked by the worker. Lastly, the employer has calculated the "mean hourly output rate" i.e. for that particular work to be carried out for that employer, the average number of tasks completed or pieces produced.

To work out whether NMW is paid for output work, it is necessary to ascertain the mean average hourly rate for making a specific item.

1. A test determines that it takes on average an hour to make 10 jumpers
2. This average (10 jumpers per hour) is divided by the fair piece rate (1.2) which equals 8.33 jumpers
3. The worker's NMW rate is then used e.g. for someone over 21 it is £ 6.31 divided by 8.33 jumpers which equals 76p fair piece rate

This means that the worker should be paid a minimum of 76p per jumper produced.

Unmeasured work- this includes anything not falling under any of the above categories. To work out the number of hours of unmeasured work done in a week, for example, when there is a daily average agreement, the employer should:

1. Confirm the agreed daily average number of hours per day, for instance 4 hours a day and the number of hours the worker is required to be available for work on a full working day, for instance 12 hours
2. Multiply the agreed daily average hours by the number of days when the worker actually was available for the full number of hours considered in the contract, for instance 3 days, then the calculation would be 4 hours times 3 days equating to 12 hours.

An example would include a carer who works on a "three days on; four days off" basis, who on their work days is required to be available for the full 24 hour period.

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