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An employer’s guide to calculating National Minimum Wage

21st July 2023

As an employer in the United Kingdom, it is essential to comply with the regulations surrounding the National Minimum Wage (NMW). Failure to do so can lead to serious consequences, including legal penalties and damage to your reputation. To avoid any potential pitfalls, it is crucial to correctly calculate the NMW and ensure that employees are always paid at or above the minimum wage rate. In this article, Rowleys Payroll Manager, Rebecca Gotch, discusses the key considerations for employers.

Current rates of National Minimum Wage

It is important for employers to be aware of the current rates of NMW. The rates vary depending on the age of the employee and whether they are classified as an apprentice. At the time of writing this article (July 2023), the following rates apply:

It is crucial for employers to regularly review and adjust their employees’ wages to ensure compliance with the current rates of the National Minimum Wage. Failure to pay the appropriate minimum wage can result in severe penalties, including financial fines and potential legal action. Employers should stay vigilant and stay updated on any changes to the rates to avoid any inadvertent violations.

Payment for working time

One common mistake employers make is failing to include all the time employees work when calculating the NMW. It is vital to recognise that payment for working time includes every minute an employee is engaged in their duties. This includes any time an employee spends on activities that are necessary for their role, such as arriving early, staying late, working through lunch breaks, or attending meetings and training sessions. All must be considered and factored into the employee’s wage calculation to ensure compliance with NMW regulations.

What should not be included when calculating National Minimum Wage?

While it is crucial to include all relevant working time, certain elements are excluded when calculating the NMW:

Potential pitfalls for employers

To avoid inadvertently violating the NMW regulations, employers should be mindful of the following situations that have the potential to catch them out:

Compliance with the UK National Minimum Wage is a vital responsibility for employers. Calculating the NMW accurately and ensuring employees are always paid at or above the minimum wage rate is crucial. By understanding the considerations outlined in this article, such as including all working time and avoiding deductions that could reduce wages below the NMW, employers can stay legally compliant.

It is always advisable for employers to seek professional advice to ensure they remain up-to-date with any changes to the NMW regulations.

For more information on NMW, visit the HMRC website.

Our CIPP-qualified payroll experts manage all aspects of payroll ensuring that NMW is calculated correctly. We work with hundreds of clients of different sizes To find out more about our payroll services, please contact Rebecca Gotch, either by email:  or call: 0116 282 7000.

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