What does not count as national minimum wage pay
Particular elements of pay that do not count
In addition to the , which are listed on the page in this guide on what counts as national minimum wage pay - how to calculate it, there are other elements of a worker's pay that do not count towards national minimum wage (NMW) pay. They must all therefore be subtracted from total pay in order to calculate if the worker is receiving the NMW.
Overtime and shift premia
A worker might be paid at a higher rate for their work during the pay reference period (PRP), for example, for working overtime, weekend or night shifts, on Bank Holidays or working longer than a certain number of hours. If so, the premium element - the element above the normal rate - of the payment does not count towards NMW pay.
To calculate the premium element, you must subtract the lowest rate that is paid to the worker (during the PRP for their work) from the worker's actual rate of pay. The result - the premium - does not count towards NMW pay.
However, if the worker is paid different basic rates for different jobs or different duties, rather than premium rates for the same job, then the whole of each rate can be included in the calculation of NMW pay.
For example, a worker works part of the day doing semi-skilled work on a machine and is paid £7.00 an hour, but helps clean the factory for another part of the day and is paid £6.00 an hour. There is no premium to subtract in this case.
See our example NMW calculations for workers being paid premium rates for overtime - Opens in a new window.
Special allowances over and above standard pay are sometimes paid by an employer to a worker for all kinds of things such as:
- working in dangerous conditions
- working unsocial hours
- working in a particular area, for example, London Weighting
- performing special duties over and above a worker's normal duties
- being 'on call' for work
Such allowances do not count towards NMW pay unless they are consolidated into standard pay or they are related to the worker's performance.
Expenses and refunds of money spent on work
If a worker spends money on something connected with their employment whether or not it is repaid by you then that amount will reduce their NMW pay.
If you refund money to a worker, which the worker has spent on something to do with their job, the refund will count as NMW pay but the expenditure will also reduce NMW pay. So in these circumstances there is no overall effect on NMW pay.
This applies, for example, when a worker pays for and you refund travel expenses, laundry costs or the price of tools or equipment, which the worker has purchased from someone else in order to do their job.
Particular deductions from pay or payments from the worker that do not count
Deductions made by the employer which do not count towards NMW pay are dealt with below.
Deductions or payments from the worker for expenditure connected with the job
Deductions which you make from a worker's pay, and payments made by the worker, to cover the cost of items or expenses that are necessary for the worker's job reduce NMW pay.
For example, if you deduct an amount from pay to cover the cost of safety clothing, uniform, tools or other equipment needed for the job, the amount deducted reduces NMW pay. If the worker has to buy tools, equipment, uniform or other items from you in order to do their job, the amount paid reduces NMW pay.
Deductions for the employer's own use or benefit
If you make any deduction from the worker's pay which is for your own use or benefit, eg, a deduction for meals provided by you, the amount deducted will not count towards NMW pay. It does not matter whether the worker agrees to the deduction or not.
Payments by a worker to another person for expenditure connected with the job
If the worker has to make payments to another person which are connected with the job, such as to buy tools, equipment, uniform or on the job travel costs, this reduces the NMW pay and the payments have to be taken away from the amount that counts towards the NMW.
If you provide accommodation to a worker there may be an effect on NMW pay. See the page in this guide on benefits in kind and accommodation.
Summary of what does not count as NMW pay
- to workers listed on the page in this guide on what counts as national minimum wage - how to calculate it.
- Overtime and shift premia.
- Allowances that are not consolidated into pay.
- Expenses and refunds of money spent on work.
- listed in the table below as not reducing NMW pay.
- Payments by the worker to another person connected with the job which are not reimbursed by the employer.
- The notional value of accommodation above the accommodation offset - as explained in the page in this guide on benefits in kind and accommodation.
Summary of deductions from pay and payments by workers and their effect on NMW pay
This table should be read together with the descriptions given above. For the special rules on accommodation, see the page in this guide on benefits in kind and accommodation.
|Deduction of income tax||No|
|Deduction of National Insurance||No|
|Deduction or payment of a contractual penalty for misconduct||No|
|Deduction or payment to repay an advance of wages||No|
|Deduction or payment of the cost of buying shares or securities||No|
|Deduction or payment to recover an accidental overpayment of wages||No|
|Payment to you for goods and services which the worker has freely chosen to purchase and which are not bought to comply with a requirement imposed on the worker||No|
|Deduction not for expenditure connected to the worker's employment or for your own use and benefit (eg union subscription/pension contributions)||No|
|Deduction or payment for accommodation, up to the worker's accommodation offset (special rules apply)||No|
|Deduction or payment for accommodation, above the accommodation offset (special rules apply)||Yes|
|Deduction for your own use and benefit||Yes|
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