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How to check your pay

Your average hourly pay has to be at least the NMW, worked out over a period called the ‘pay reference period’.

To find out whether you are getting the NMW you need to know what can counts towards it and what doesn’t. You also need to know which hours you are entitled to be paid for. This depends on which of the four types of work under the NMW rules you are doing:

• time work
• salaried hours
• piece or output work
• unmeasured work

• Calculating the National Minimum Wage: time work or salaried hours

• Calculating the National Minimum Wage: output (piece) work

• Calculating the National Minimum Wage: unmeasured work

The pay reference period

This is usually the period of time that you are actually paid for. For example, if you are paid weekly your pay reference period is one week, if you are paid monthly it is one month. You must be paid, on average, at least the NMW during each pay reference period.

Under the NMW rules, the pay reference period cannot be longer than a month. If your employer pays you at longer intervals (eg once a quarter) you must still get the NMW on average each month during that quarter.

When working out whether you are getting the NMW, the pay that counts may not just be the pay you receive during the pay reference period. It also includes pay which you earn during that period, but don’t receive until the next one. For example, if you are paid monthly and do some overtime near the end of July you might not be paid for it until August. The overtime pay will still count towards your July pay.

Pay that counts towards the NMW

The pay you receive that can be used to calculate the NMW is known as your NMW pay.

NMW pay is calculated on gross pay (before tax and National Insurance have been taken off). Your gross pay includes your basic pay for the work you have done and other types of pay which count towards the NMW. For example, sales commission, performance-related pay or other payments based on how well you do your job.

Some payments don’t count towards NMW pay. You should deduct these from your total pay before working out whether you are getting the NMW. Payments which don’t count include:

• loans
• advances of wages
• pension payments
• retirement lump sums
• redundancy payments
• rewards under staff suggestion schemes
• any premium element (in other words, anything you are paid on top of your basic pay) for working at special times, eg overtime or on bank holidays
• allowances on top of your basic pay, for example for working unsocial hours, in a particular area (eg London Weighting), in dangerous conditions, ‘on call’, or performing special duties over and above your normal ones
• tips, gratuities, service charges and cover charges (until 1 October 2023 these did count towards NMW pay, as long as your employers paid them through his payroll; they no longer do, regardless of how you receive them)

Deductions from your pay and payments to your employer

Some deductions and payments reduce NMW pay while others do not. However, your employer cannot make any deductions from your pay, or take payments from you, unless certain conditions are met.

• Pay deductions

Deductions and payments which do not reduce NMW pay

Some deductions from pay, or payments you make to your employer, are ignored in working out NMW pay. So if you are paid £6.00 an hour and deductions or payments for any of the reasons listed below reduce this to £5.00, the question is whether £6.00 an hour, not £5.00, meets the NMW in your case.

Deductions and payments which do not reduce NMW pay are:

• penalties for misconduct - as long as these penalties are in your employment contract
• paying back an advance of wages
• paying back an accidental overpayment of wages
• the costs of any shares or securities which you have chosen to buy in your firm
• money you choose to have deducted from your pay (eg a pension contribution or trade union subscription), as long as the deduction isn’t required as part of your work and isn't for your employer's own use and benefit
• payments you choose to make to your employer to buy goods or services from them, for example, if you spend some of your wages on meals in the staff canteen

Deductions and payments which reduce NMW pay

Some deductions from pay, or payments you make to your employer, are taken into account in working out NMW pay. For example, you are paid £7.00 an hour and deductions or payments for any of the reasons listed below reduce this to £5.00. The question is whether £5.00 an hour, not £7.00, meets the NMW in your case.

Deductions and payments which reduce NMW pay are:

• refunds of any money you spent in connection with your work, for example the cost of purchasing tools or uniform
• refunds of any expenses you incurred doing your job, for example travel costs
• deductions to cover the cost of items your employer supplied to you that are needed for your job, for example, tools or uniform
• deductions for your employer’s own use and benefit for goods and services, for example transport they provide to and from work, regardless of whether you have the option of using the goods or services

Your employer doesn't have to be making a profit from a deduction for it to be for their own use and benefit. For example, if they provide transport at a loss, any deductions they make for providing it help to reduce their loss. The reduction is part of the ‘use and benefit’ they will have had from the deductions.

Do ‘benefits in kind’ count towards the NMW?

Benefits in kind are anything your employer provides for your benefit apart from pay. There is nothing to stop employers offering you benefits in kind. However, an equivalent value in money for a benefit in kind can't be counted towards NMW pay, except for a set amount for accommodation.

Examples of benefits in kind which don’t count towards NMW pay are:

• meals
• fuel
• a car
• your employer’s contribution to your pension fund
• help with removals
• medical insurance
• lunch vouchers
• child care vouchers

• Calculating the National Minimum Wage: when your employer provides accommodation