National Minimum Wage: Pay that counts towards the National Minimum Wage
Earnings used to calculate the NMW are known as NMW pay. NMW pay is calculated on gross pay (before tax and National Insurance have been taken off). Gross pay includes basic pay and other types of pay which count towards the NMW. For example, sales commission and performance-related pay.
Some payments don’t count towards NMW pay and should be deducted from total pay before considering if the NMW is being paid. Payments which don’t count include:
- advances of wages
- pension payments
- retirement lump sums
- redundancy payments
- rewards under staff suggestion schemes
- any premium element (in other words, anything paid on top of basic pay) for working at special times, eg overtime or on bank holidays
- allowances on top of 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 normal ones
- tips, gratuities, service charges and cover charges (until 1 October 2009 these did count towards NMW pay, as long the employers paid them through his payroll; they no longer do, regardless of how they are received)
For details of what pay counts towards the national minimum wage, please refer to the Calculating the national minimum wage section of Gov.UK.
Updated 16 May 2013