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Calculating Minimum Wage if paid annual salary

Source: HM Revenue & Customs | | 25/03/2021

New National Minimum Wage and National Living Wage rates will come into effect on 1 April 2021. These changes will see the National Living Wage increase by 19p to an hourly rate of £8.91 and the National Minimum Wage will increase to £8.36 (a rise of 16p). There are also increases in the other minimum wage thresholds. 

There are special rules to check that salaried workers who receive an annual salary are being paid at least the equivalent of the minimum wage. 

HMRC’s guidance states that someone is undertaking salaried hours work if all of the following apply:

  • their contract states how many hours they must work in return for their salary (their basic hours)
  • they’re paid in equal, regular instalments through the year, for example monthly or every 4 weeks
  • there is no more than a month between each payment
  • they do not get paid more than once a week

Once you know how many basic hours are relevant you can calculate if the employees are being paid at least the minimum wage to which they are entitled. 

There are penalties for employers that are found to have underpaid their workers and, in some cases, there may be criminal prosecutions.

 

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