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National minimum wage: Are you paying your employees enough?

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Employers are obliged to pay the national minimum wage and some employers find that they have inadvertently paid their employees too little.  This can be particularly problematic where employees have unusual working practices (such as certain employees who are required to be on-call at certain times whilst living at the employer’s premises).

The national minimum wage rules can also be complicated, with different rates of pay applying to different employees (for example due to their age).

National minimum wage rates

2015 2016 2017 2018
Apprentices £3.30 £3.40 £3.50 £3.70
16 to 17-year-olds £3.87 £4.00 £4.05 £4.20
18 to 20-year-olds £5.30 £5.55 £5.60 £5.90
21 to 24-year-olds £6.70 £6.95 £7.05 £7.38
25-year-olds and above £6.70 £7.20 £7.50 £7.83

 

Interns and work experience

The term work experience generally refers to a limited period of time that someone spends with an employer. It can give the person the opportunity to learn about working life and the working environment, the chance to shadow the employer’s employees and/or a chance to actually try certain tasks. The nature, length and arrangements for work experience vary greatly.

Work experience is sometimes referred to as a placement or an internship. Internships are often positions requiring a higher level of qualification than other forms of work experience, where the person can gain experience for a professional career. However, the term intern has no legal status. If an employer has any interns they will be treated in the same way as someone doing work experience for national minimum wage purposes.

Whether or not a work experience student or intern is entitled to the national minimum wage will depend on the arrangements under which they are working. Either the person will be a worker eligible for the national minimum wage, a worker who is expressly exempt from being eligible for the national minimum wage or not a worker and therefore not eligible.

The following are not entitled to receive the national minimum wage:

Students doing work experience as part of a UK based higher or further education course, where their placement does not exceed 1 year. This does not include those students who take a gap year, or who take on work which is not a part of their course

  • Those who are of compulsory school age.
  • Those who are engaged as a genuine volunteer for a charity, a voluntary organisation, an associated fund-raising body or a statutory body. They must only receive limited and specific benefits such as reasonable travel or lunch expenses and are not entitled, under the terms of their employment, to receive any other monetary payments or benefits in kind.
  • Those who participate in Government and European programmes have no entitlement to the NMW for work done as part of the programme.

The guidance has made it clear that the person’s entitlement to the NMW does not depend on the person’s job title, instead, it is based on the arrangement with the employer and within the organisation itself and the tasks that the person is being asked to complete.

In addition, the guidance has made it clear that a person is not automatically exempt from being paid the NMW just by virtue of them being labelled a work experience student, intern or by having their work at the organisation described as a placement, internship or unpaid work.

A work experience student or intern will not be entitled to the NMW if they are merely shadowing an employee of the organisation and not expected to perform any work themselves. In addition, if there is no obligation on the work experience student or intern to attend work and they will suffer no detriment if they fail to provide their services, then they will not be entitled to the NMW.

However, if the work experience student or intern is actually completing proper work, are expected to attend work during specific hours and would be subjected to a detriment if they failed to do so, this a strong indication that they are likely to be considered as workers and are, therefore, entitled to receive the NMW.

The new guidance comes in response to certain public criticisms of a number of organisations that were taking on interns and paying them little or no money to do substantial work for them. The guidance makes it clear that by just labelling someone as an intern an organisation can no longer avoid the obligation to pay the person the NMW if they are completing actual work for the organisation.

How can you stay the right side of the law with the National Minimum Wage?

Here is a quick checklist to help you:

  • Make sure that you pay the National Minimum Wage and the National Living Wage at the correct rate to all workers who are entitled to it.
  • Check with your payroll department to ensure that all workers are receiving the National Minimum Wage or National Living Wage or above.
  • Identify any work experience students or “interns” in your organisation and assess the type of work they are asked to perform whilst they are in your organisation.  If they are actually completing work for you, the National Minimum Wage or National Living Wage may apply.
  • Depending on the outcome of your assessment with regard to work experience and interns, you may need to re-evaluate your organisation’s strategy in relation to taking on work experience students or interns.
  • Consider keeping records compliant with the National Minimum Wage and National Living Wage.  HM Revenue & Customs can take employers to court for failing to pay the National Minimum Wage or National Living Wage.
  • Check whether you fall within any of the exemptions to the National Minimum Wage or National Living Wage.  However, note that these do not relate to the size of the business, sector, job or region.  Exemptions apply to self-employed people, volunteers, company directors and family members.

If you would like more information on the national minimum wage, please contact our Employment & HR team on 01332 340 211.

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