Minimum Wage / Overtime

[TRP67]

If employed on a contract at an hourly rate with overtime payable at time + 1/3 how does the minimum wage view this if the hourly rate falls below the minimum wage, although as an "average" when you take the overtime into consideration it is above it.

For instance (figs for example only)

Employed at £5.00 per hour for 8 hour shift with overtime payable at time + 1/3

Minimum wage is £5.20 - Employee works a 12 hour shift so earns:
8 x 5.00 + 4 x 6.33 - so for 12 hours earning = 65.32

So whilst the basic is paid below average - with overtime the average wage takes it over this level.

I understand that as long as the total hours worked / pay earned does not drop below this level then there is no breach - however in this instance the contract is for overtime at time plus 1/3 which I think may mean it is not right

Hope this makes sense

 

[internetspaceships]

Why not pay the extra 20p per hour and be done with it?

 

[TRP67]

Im not the employer - otherwise I would agree - I want to know how the employer stands - are they right in doing this

 

[Steve Sellers]

https://www.gov.uk/am-i-getting-minimum-wage

 

[TRP67]

Still doesnt really answer the question - Im trying to get to the bottom of if the minimum wage is calculated using overtime rates as well

This is means to be a law and as usual is so confusing - there really should be an easy guideline instead of so much cloudy water as usual

Can it be argued that by working a 10 hour day with 2 hours at overtime - your "average" hourly rate is over minimum wage - although if doing just the standard 8 hours at basic its not - surely its the basic hourly wage - ie the lowest pay that needs to be at that level?

 

[OldWelshGuy]

My understanding is that the rate is an hourly rate as per contract.

I know that if there is a requirement to work unpaid overtime, then this brings the rate below the NMW I am not sure about the reverse though. The law is an ass so i wouldn't bet my house on it.

 

[Newchodge]

Still doesnt really answer the question - Im trying to get to the bottom of if the minimum wage is calculated using overtime rates as well

This is means to be a law and as usual is so confusing - there really should be an easy guideline instead of so much cloudy water as usual

Can it be argued that by working a 10 hour day with 2 hours at overtime - your "average" hourly rate is over minimum wage - although if doing just the standard 8 hours at basic its not - surely its the basic hourly wage - ie the lowest pay that needs to be at that level?

You need to work out the average over the working week. So if working a total of 10 hours one day and 8 hours the other 4, the weekly income needs to be at least 42 x NMW.

This assumes they are paid weekly. If they are paid monthly, you work it out over the month.

 

[TRP67]

Thats what I thought - but there is so much conflicting information - I have found numerous posts like this that say:

9. Most of our employees do some overtime. Can we include overtime payments in calculating whether we are paying the minimum wage?

[FONT=Arial, sans-serif]You have to strip out any overtime premium from the sum that you include in your calculations. To find the premium, you take the lowest rate that you pay each employee for the same work during normal hours, and deduct that from the amount that you pay in overtime. So for the purposes of calculating the minimum wage, you are effectively paying people for overtime at the lowest rate that you would pay for normal working.

and again here:

[/FONT]

1.2​

The average pay must be at or above the minimum wage for each 'pay reference period'.

• The reference period is the worker's actual pay period, up to a maximum of a month.
• Premium payments (eg overtime at time-and-a-half) cannot be included when calculating whether the worker has been paid the minimum wage. Only the standard hourly rate portion of the overtime payment can be counted.

 

[Newchodge]

I may be wrong then. I have checked on the HMRC website, but that makes no mention of overtime being calculated differently, just the average hourly rate over the reference period. Have you tried the NMW helpline.

You would need to bear in mind as well, what would happen if there were no overtime available. You would definitely be in breach then, and changing the rate you pay depending on whether overtime is available is certainly not a good idea!

 

[TRP67]

Yeah the employer understands that in the event of a "basic" day with no overtime the wage would need to be topped up - however on the basis of the overtime they are taken over the limit

Where I think it is floored is the contract is for overtime at over time rates (time plus 1/3) therefore it is in breach as this is not being paid at that rate - if it is then the basic which forms this calculation is below MW - if that makes sense.

I cannot believe that this isnt clear anywhere

Again this is on a business site which clearly states you disregard overtime when calculating:

[FONT=Arial, Helvetica, sans-serif]Working out whether you are paying NMW[/FONT]
[FONT=Arial, Helvetica, sans-serif]You must pay the minimum wage over each ‘pay reference period’. This is normally the period for which you pay people — for example, weekly or monthly. It cannot be longer than a calendar month.[/FONT]
[FONT=Arial, Helvetica, sans-serif]You can include any wages earned, but not paid, during that period — for example, bonuses or commission — provided that it will be paid in the next pay reference period. You can also include the value of any accommodation provided, but only up to a maximum of £4.82 per day (£33.74 per week).[/FONT]
[FONT=Arial, Helvetica, sans-serif]If the accommodation is worth more than that, you will either have to take the loss or ask the employees to contribute — either way, the excess cannot be included in your calculations.[/FONT]
[FONT=Arial, Helvetica, sans-serif]When working out whether you are paying NMW, you must ignore any tips and gratuities received - even if all the tips are collected and divided equally. You must also ignore any other benefits-in-kind. You should then subtract any overtime premium you have paid. The result should equal or exceed the hourly NMW when divided by the number of hours worked.[/FONT]​

 

[Newchodge]

Would it not be simpler to pay NMW and pay overtime at flat rate? Many employers have stopped paying an overtime premium.

 

[PDRD]

What happens if no overtime is worked for a week? The pay is then below NMW.

Sent from my GT-I9305 using UK Business Forums

 

[TRP67]

PDRD - correct - there is never a week with no overtime - although if there were then the company would simply top the payment up

Newchodge - yes it would, however the company doesnt do this - again I stress Im not the employer - Im asking on behalf of an employee

 

[Suzuki]

It seems pointless from an employer point of view to want to do this, its going to create a huge amount of admin work where none was required. You're going to need to work out how much to make up peoples wages by if they phone in sick on the days they were meant to do overtime.

 

[TRP67]

Again totally agree, and again stress I am NOT the employer - I am trying to gauge if an employer is allowed to do this?

 

[Cylon]

PDRD - correct - there is never a week with no overtime - although if there were then the company would simply top the payment up

Newchodge - yes it would, however the company doesnt do this - again I stress Im not the employer - Im asking on behalf of an employee

As you are asking on behalf of a freind heres a link that may help:
https://www.gov.uk/national-minimum-wage-rates

If the employer 'tops up' to the minimum wage I can't see an issue although the employer may be leaving themselves a bit open if they aren't setting the hourly rate correctly, in my opinion the employer maybe sailing a bit to close the wind and perhaps a revision of their pay structure might save them some greif in the long run.

Course as your just asking this question on behalf of freind who will do nothing about it anyway chances are they will continue on as before.

 

[TRP67]

Still doesnt really answer the question - there must be clear legislation somewhere that states whether or not you are allowed to average it out and include increased (overtime) pay in with it....

I may consult ACAS or a similar organisation, Im just shocked its so unclear.

I definitely feel that the minimum wage should be set as the standard rate - and any overtime should be paid at that plus one third as the contract states..

The problem has arisen due to a pay freeze for 4 years, which has meant that the basic pay has remained the same whilst the minimum wage has crept up, overtaking the wage level - although as an average over the day the rate is higher because of the two hours a day paid at overtime rate.

 

[internetspaceships]

There you go, you've answered your own query.

 

[Cylon]

Still doesnt really answer the question - there must be clear legislation somewhere that states whether or not you are allowed to average it out and include increased (overtime) pay in with it....

Clear legislation-an oxymoron if ever ive heard one

I may consult ACAS or a similar organisation, Im just shocked its so unclear.

Can your freind not do anything for himself, get him to do it

I definitely feel that the minimum wage should be set as the standard rate - and any overtime should be paid at that plus one third as the contract states..

The hourly rate is set but if overtime forms part of it and the employer will top it up if it doesn't occur then the hourly rate varies-does it not

The problem has arisen due to a pay freeze for 4 years, which has meant that the basic pay has remained the same whilst the minimum wage has crept up, overtaking the wage level - although as an average over the day the rate is higher because of the two hours a day paid at overtime rate.

So either the initial pay rate 4 years ago was above MW and the employer deceided that in order to not increase pay they would just suppliment it with overtime which always happened anyway negating the need to increase the initial rate of pay which in turn would increase the overtime rate.

On the face of it this looks like a clever move by the employer but give ACAS a call and see what they say. Kudos by the way for doing all your freinds leg work for him sounds like the lazy bugger doesn't deserve a basic pay increase anyway

 

[mariefab]

Overtime premiums cannot be included in the calculation of the NMW.
HMRC is responsible for enforcing the NMW.
Abandon hope now of finding 'clear' legislation, but FWIW, if you google National mimimum wage Act it'll be the first item on the list.

Then google National minimum wage calculator (again it'll be the first item) and put in the actual details to confirm.

Sorry I can't post links because I've made less than 15 posts.

 

[Employment Law Clinic]

I want to know how the employer stands - are they right in doing this

No.

Still doesnt really answer the question - Im trying to get to the bottom of if the minimum wage is calculated using overtime rates as well

This is means to be a law and as usual is so confusing - there really should be an easy guideline instead of so much cloudy water as usual

Can it be argued that by working a 10 hour day with 2 hours at overtime - your "average" hourly rate is over minimum wage - although if doing just the standard 8 hours at basic its not - surely its the basic hourly wage - ie the lowest pay that needs to be at that level?

There is a law - Regulation 31(1)(c)(i) of the National Minimum Wage Regulations 1999.

Thats what I thought - but there is so much conflicting information - I have found numerous posts like this that say:

Where’s the conflicting information?

Abandon hope now of finding 'clear' legislation, but FWIW, if you google National mimimum wage Act it'll be the first item on the list.

Why? Regulation 31(1)(c)(i) of the National Minimum Wage Regulations 1999 is clear, and the EAT found it so

The philosophy of the National Minimum Wage Regulations is clearly that an employee's basic minimum wage before overtime enhancement or other allowances should not fall below the statutory minimum and it seems to me that it would be completely contrary to the purpose of the legislation if that obligation could be avoided simply because an employee chooses to normally work those hours when she would be in receipt of some enhancement. The Appellant's position is indeed to confuse the word "paid" with "payable". The lowest payable during the reference period must clearly be that minimum sum due under the contract of employment.

http://www.bailii.org/uk/cases/UKEAT/2009/0246_09_2511.html


Karl Limpert

 

[mariefab]

I would expect the EAT and people like yourself who are familiar with statutes to find them clear.
But to laypersons the language can appear so dense as to be incomprehensible.
I mean, it doesn't simply say, 'Don't use the overtime premium in the calculation.' does it? Although that's exactly what it means.

 

[Billmccallum]

If employed on a contract at an hourly rate with overtime payable at time + 1/3 how does the minimum wage view this if the hourly rate falls below the minimum wage, although as an "average" when you take the overtime into consideration it is above it.

For instance (figs for example only)

Employed at £5.00 per hour for 8 hour shift with overtime payable at time + 1/3

Minimum wage is £5.20 - Employee works a 12 hour shift so earns:
8 x 5.00 + 4 x 6.33 - so for 12 hours earning = 65.32

So whilst the basic is paid below average - with overtime the average wage takes it over this level.

I understand that as long as the total hours worked / pay earned does not drop below this level then there is no breach - however in this instance the contract is for overtime at time plus 1/3 which I think may mean it is not right

Hope this makes sense

I'm a little confused... OP states that empolyee paid at £5 per hour

NMW is....
Year 21 and over 18 to 20 Under 18 Apprentice*
2012 (current rate)£6.19 £4.98 £3.68 £2.65


Source: https://www.gov.uk/national-minimum-wage-rates

The base rate must meet NMW, any calculation for overtime comes from that.

 

[Cylon]

A bit late unless i've missed it but have we established the age of the employee in question.

 

[Employment Law Clinic]

I'm a little confused... OP states that empolyee paid at £5 per hour

He mentions the figures (which I assume to include the £5) are for example only.



Karl Limpert