Calculating a Week’s Pay: Don’t Miss the Basic Hours

One of the trickiest aspects of National Minimum Wage (NMW) compliance is ensuring you’ve captured all the hours that count as “work.” It’s not just about the hours on the rota or timesheet.

Calculating whether you’re paying the NMW isn’t just about the hourly rate on a payslip. The law requires you to look at the total pay in a pay reference period (often a week) and divide it by the number of hours worked in that period. But what exactly counts as “basic hours” for this calculation?

For salaried hours workers, the contract is your starting point. The contract should specify the basic annual hours, which you then divide by the number of pay periods in the year (e.g., 52 for weekly, 12 for monthly). For example, if the contract is for 2,040 hours a year and the worker is paid weekly, each week covers 39.23 hours (2,040 ÷ 52). Even if the actual hours worked in a week are higher or lower, for NMW purposes, you use the notional basic hours unless the worker has exceeded their annual basic hours, in which case excess hours must be included.

Key NMW points to consider:

• Absences: If a worker is paid their normal salary during absences (e.g., holidays, sick leave), those hours count as worked. If paid at a reduced rate, only the hours paid at the full rate count.
• Excess Hours: If a worker exceeds their basic annual hours, you must ensure they are paid at least the NMW for all additional hours worked.
• Changing Hours: If contractual hours change mid-year, you must apportion the annual hours accordingly, using the number of days before and after the change to calculate the correct basic hours for each period.

Always keep clear records of contractual hours, pay periods, and any changes to contracts. This will help you demonstrate compliance if HMRC comes calling.

Common pitfalls when calculating hours:

• Unrecorded Prep or Close-Down: Time spent opening up, closing down, or preparing for a shift counts as working time.
• On-Call at Work: If a worker is required to be at or near the workplace and available for work, this time counts, even if no actual work is done.
• Travel Between Assignments: For mobile workers (e.g., care workers), travel time between clients is working time, but commuting from home to the first assignment is not.
• Sleep-In Shifts: Only time spent awake for the purposes of working counts, unless the worker is not provided with suitable sleeping facilities, in which case all time may count.

Review your time recording systems. Encourage workers to record all time spent on work-related activities, not just scheduled hours. If in doubt, err on the side of inclusion – HMRC will!