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Complying with the National Minimum Wage

You must ensure you pay your workers at least the National Minimum Wage (NMW). This applies to most workers who are:

  • aged 18 and over including homeworkers, agency workers, part-time workers, casual workers, piece workers, workers who are paid by commission and workers on short-term contracts
  • since 1 October 2004, young workers aged 16 to 17 who are above the age of compulsory schooling
  • apprentices aged 19 and over, after 12 months' apprenticeship 

There is a separate minimum wage for agricultural workers. You can find out about agricultural wages on the Department for Environment, Food and Rural Affairs (Defra) website.
Among those not entitled to the NMW are:

  • apprentices under the age of 19 and those over the age of 19 in the first year of their apprenticeship
  • share fishermen
  • genuine voluntary workers
  • au pairs living as part of the family
  • family members living at home and helping to run a family business
  • UK university or college students on placement with an employer as part of their course, ie a sandwich course that is no longer than one year
  • genuinely self-employed

Rates and calculation of the National Minimum Wage

Currently the three rates of the National Minimum Wage (NMW) are:

  • the adult rate of £5.52 per hour for workers aged 22 and over 
  • the development rate of £4.60 per hour for workers aged 18 to 21
  • a third rate of £3.40 per hour for workers aged 16 to 17 who are above the age of compulsory schooling

Calculating the NMW

How the NMW is calculated depends on whether the work is:

  • time work - a set number of hours or period of time
  • salaried-hours work - a set number of hours each year, paid by annual salary
  • output work - payment is according to the number of things produced or tasks performed
  • unmeasured work - specific tasks but no set hours

There are specific rules on how the NMW applies to output workers, who are paid by the piece of work produced or task performed, and include homeworkers. Employers must either pay their output workers the minimum wage for every hour they work, or pay a fair piece rate that allows all workers to earn the minimum wage.

If you pay your output workers a fair piece rate that allows the average worker to get the minimum wage, you must increase that rate by 20 per cent. This is aimed at making sure that output workers who are slightly slower than average receive the NMW. Download guidance about fair piece rates from the Department for Business, Enterprise and Regulatory Reform (BERR) website (PDF).

Read the guide on the NMW for employers on the BERR website.