Minimum wage calculation TRAP

A very good friend of mine Alison from Metis HR – raised a very potentially worrying scenario on calculating an employee’s minimum wage if they are paid monthly:


The National Minimum Wage for those over 25 is £7.50. If you employ someone over 25 on a 25 hour per week contract their weekly gross pay is 25 x £7.50 = £187.50. You may have calculated their monthly salary by multiplying their weekly wage by 52 (£9750) and dividing by 12 to get a monthly salary of £812.50.

However HMRC are now pursuing the line that there are not 52 weeks in the year there are 52.14 and if, as in the scenario above, you are calculating pay in this way you may not be paying National Minimum Wage and may, therefore, be breaking the law.

In the scenario above this person actually works 25 hours x 52.14 weeks = 1303.5 hours per year. If you divide the annual salary (£9750) by hours worked (1303.5) you are only paying £7.48 per hour. You are not, in this scenario, paying the National Minimum Wage. My payroll contact told me the story of a client who was prosecuted for paying £0.02 under the National Minimum Wage and named and shamed on their website as an employer who doesn’t pay minimum wage.

This scenario applies to all ages of employees and their appropriate National Minimum Wage.