National Minimum Wage and Pay Reference Periods

15 May 2019 | Kavita Parmar

Wage increase

From 1st April 2019, the national minimum wage and national living wage rates increased, and employers have the responsibility to ensure their employees are receiving the correct rates of pay within their pay reference period.

The pay reference periods are set by how often an employee is paid, for example one week, four weeks, one month etc. A pay reference period cannot be longer than 31 days and employers must ensure their employees are not paid below the minimum wage, on average. For example, if a worker is paid fortnightly, their pay reference period will be two weeks. If the worker’s pay is calculated fortnightly due to a two week shift pattern but paid monthly, their pay reference period is a month. It doesn’t matter when the payment of wages is made when you are defining the pay reference period. The crucial part to consider is the period the payment covers. For example, a worker who is paid for the month of July on the last Thursday of the month, will have the same pay reference period as someone who is paid for the same period on the last day of the month i.e. 1st July to 31st July.

Employers notice

It is best practice that employers notify their employees in writing that their wages will reflect the new National Minimum Wage rate in their next pay date which follows on from 1st April. Failing to pay the minimum wages, may result in employers being “named and shamed” by the government and facing fines of up to £20,000 and criminal sanctions. Some of the employers who have been named and shamed include Marriott Hotels, TGI Friday’s, Wagamama’s, National Society for Epilepsy and Xercise4less. 

Wagamama’s were fined an undisclosed amount for failing to pay staff the National Minimum Wage. Wagamama’s has repaid an average of £50 to 2,630 employees. TGI Friday’s had to repay £25 each to 2,300 staff. Wagamama’s employees were required to provide their own black trousers or skirts as part of their uniform. Wagamama’s staff who were paid the minimum wage were effectively forced to spend their wage on their work uniform which is an unlawful deduction of wages. This case was similar to the TGI Friday case in relation to their footwear. TGI Friday’s have reimbursed their team members for the purchase of their black uniform shoes.

Therefore, if you decide to make any deductions from your employees’ wages, it is important that you seek advice prior to making any deductions to ensure you are not breaching the National Minimum Wage requirements. For further guidance on this matter and the pay reference period, please contact the employment advice line.

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