In this section:
- Paying your employees
- The national minimum wage
- Payroll calculations and records: an introduction
- Using commercial software or HMRC’s P11 Calculator
- Setting up and using the Employer CD-ROM P11 Calculator
- Completing the paper form P11
- Calculating student loan deductions
- Payroll giving: an introduction for employers and pension providers
- PAYE record keeping
- Correcting payroll errors
The national minimum wage
The national minimum wage sets minimum hourly rates that employers must pay their workers. It covers almost all workers in the UK and is divided into three rates that apply to workers of different ages. This guide provides a basic overview of the national minimum wage and explains the role of HM Revenue & Customs (HMRC) in enforcing it.
The rules in this area can be complicated, so at various stages this guide also provides links to other sources of information. These will give you the greater detail needed to calculate national minimum wage requirements for individual workers.
On this page:
- National minimum wage - the three rates
- Who's entitled to the national minimum wage?
- Which payments count towards the national minimum wage?
- How many hours has your worker worked?
- Record keeping
- Calculating arrears
- Enforcement and penalties
- Paying national minimum wage - further help
- More useful links
National minimum wage - the three rates
There are three different national minimum wage rates, which are usually updated in October each year. The rates that apply from 1 October 2009 are as follows:
- for workers aged 22 years or more: £5.80 per hour
- for workers aged 18 to 21 inclusive: £4.83 per hour
- for workers aged under 18 (but above compulsory school age): £3.57 per hour
Check an archive of national minimum wage rates for earlier years
Who's entitled to the national minimum wage?
Almost all workers who work in the UK are entitled to the national minimum wage. But there are some groups who aren’t entitled, including:
- self-employed people
- apprentices under the age of 19
- apprentices aged 19 or over - but only for the first year of their apprenticeship
- children who are still of compulsory school age
For a full list of all the exceptions, follow the link at the end of this section.
It makes no difference to a worker’s entitlement to the national minimum wage whether they work for you full time or part time, or whether they are an agency worker, a temporary or casual worker, a piece worker or a home worker.
Which payments count towards the national minimum wage?
National minimum wage pay is calculated in a certain way. Many of the
payments that you make to a worker will count towards their national
minimum wage pay, but some won't. For example, a worker’s basic pay
(before deductions of tax and National Insurance) counts towards national
minimum wage pay, but any payments for expenses do not count.
For a full list of what does and doesn’t count towards national minimum
wage pay, follow the link below.
Find out what counts as national minimum wage pay on the Businesslink website (Opens new window)
How many hours has your worker worked?
Every worker who's entitled to the national minimum wage must be paid at least their national minimum wage rate on average for every hour worked in each pay reference period. (The pay reference period is the interval at which you pay them - such as weekly or monthly, but it cannot be longer than a calendar month.)
This means that to work out how much you’re required to pay a worker, you need to calculate how many hours they have worked. For national minimum wage purposes, there are four different types of work, and there are different rules for calculating the number of hours worked for each of these.
The four types of work are:
- time work
- salaried hours work
- output work
- unmeasured work
For full details of how the national minimum wage applies to each type of work, follow the link below.
Read about which hours the national minimum wage must be paid for on the Businesslink website
Record keeping
You must keep records that show you pay at least the national minimum wage to anyone who works for you and is entitled to it. If you pay your workers well above the minimum requirement, then it's likely that your standard payroll and other business records will be sufficient for this purpose.
HMRC compliance officers are entitled to ask you to produce your records for inspection. In certain circumstances, you must also produce your records if one of your workers asks to see them because they believe they’re not being paid the national minimum wage. You are required to keep records relating to the national minimum wage for at least three years. But it's a good idea to keep them for six years (five years in Scotland) in order to show that you have paid at least national minimum wage rates if a civil claim is brought against you.
Calculating arrears
If you realise you haven’t paid a worker at least the national minimum wage requirement, then you must work out and pay the arrears to the worker.
From 6 April 2009 you must calculate any arrears using a formula that includes the current national minimum wage rate. This means that you may end up paying more than you would have if you had paid the correct amount to start with.
Enforcement and penalties
HMRC enforces the national minimum wage. From 6 April 2009, if HMRC finds you have underpaid the national minimum wage it will issue a notice of underpayment. This will show the arrears you must pay to your workers and the penalty you must pay to HMRC.
The penalty is 50 per cent of the total underpayment that has occurred from 6 April 2009. This figure will be shown separately on the notice of underpayment. There is a minimum penalty of £100 and a maximum of £5,000. If you pay the arrears and the penalty within 14 days of the date on which the notice of underpayment is served, you only need to pay half of the penalty.
If you receive a notice of underpayment you have a right of appeal. You can appeal against:
- HMRC’s decision to issue a notice of underpayment
- any requirement imposed by the notice of underpayment
Details of how and where to appeal will be included with the notice of underpayment.
Paying national minimum wage - further help
If you need more help and advice about paying the national minimum wage, you can contact the Pay and Work Rights Helpline on Tel 0800 917 2368 The helpline is open from 8.00 am to 8.00 pm, Monday to Friday (excluding bank holidays) and 9.00 am to 1.00 pm on Saturdays.
More useful links
Use the online form to make a national minimum wage complaint (Opens new window)
Use the national minimum wage entitlement and rate checker on Businesslink (Opens new window)
