Monthly hours paid below minimum wage due to salary being averaged out over the year.

[Puzzled]

Hi

Hopefully you guys will know the answer to this as I couldn't help and I can't find what I'm looking for on google either.

Friend of mine has been at a new job for a couple of months now, only a minimum wage job with fixed hours and occasional overtime. He asked me to look at his payslip as when he divided the hours worked that month by the amount he was paid it brought the hourly rate below minimum wage (before any deductions).

When he asked about it they told him that his pay is averaged out over the 12 months but that doesn't sound right to me for a minimum wage job, surely he should be paid for hours worked at the minimum legal rate?

He doesn't plan on being there for 12 months either so when he leaves I'm guessing they'll need to make up the difference but from what he's told me I highly doubt they will.

So question is, can a minimum wage job be averaged out over 12 months meaning some months will fall below the legal minimum pay rate for hours worked?

Annoyingly they haven't given him any sort of written contract (or workplace pension, thought that was a legal requirement now) and he didn't agree to anything verbally either.

Thanks

 

[Rroff]

Work place pension you have to earn something like over approx. £800 a month between two consecutive test point for auto-enrolment.

I'm not sure the exact rules on minimum wage but it definitely isn't over a year - the reference period is 4-12 weeks depending on circumstances.

 

[Jonnybmac]

Surely a min wage job should be paid weekly? Doesn't seem right to have a salary based pay on minimum wage. I'd be looking else where for a job.

He should be paid the hours worked that month atleast. Are you saying its a fixed rate per month regardless of how many days in the month there is? So some months he gets more/less than others? Doesn't seem very fair if your outgoings are weekly based, which i presume on a min wage job they will be and not per calender month.

 

[Energize]

Pay needs to be averaged out over the payment period which I am assuming is one month, so if it averages out less than minimum wage over a month then definitely illegal.

https://www.gov.uk/minimum-wage-different-types-work/paid-an-annual-salary

 

[Rroff]

Surely a min wage job should be paid weekly?

A lot of companies moved to monthly around 2009-10 or so can't remember exactly now - for one I think to make things easier with the changes to minimum wage rules around that time.

 

[Puzzled]

From what I gather its that the pay is based on the average days in a month rather than the actual days.

So he worked 35 hours in July but his pay is actually about £20 short (bringing his hourly pay below minimum wage) as his wage wasn't based on a 31 day month but an averaged month. His wage slip doesn't break down the hours worked, just that months pay figure minus tax, NI etc but when you divide his pay before deductions by the hours worked it doesn't meet the minimum wage.

Doesn't seem right to me, it should be a very simple wage. X set hours at £7.83 plus whatever overtime is worked, I don't see why they would need to average anything out and I've told him to get a straight answer from his boss on how exactly his pay is worked out.

 

[HangTime]

Pay needs to be averaged out over the payment period which I am assuming is one month, so if it averages out less than minimum wage over a month then definitely illegal.

https://www.gov.uk/minimum-wage-different-types-work/paid-an-annual-salary

I think that's the point though, if I've understood correctly the employer has averaged the salary across the year in line with what is described in that link. So you have a minimum monthly salary based on number of hours per year divided by 12. However then if you view a given month in isolation the effective hourly rate can dip below in cases where that month has more working days than average. This fits with what the OP has described because July and August both have 31 days so his friend has probably worked more hours than average in those months but still gets an average month's pay. Then in say February they will be probably minting it and getting paid more than minimum wage.

Presumably if they leave employment mid-year then it will get calculated across that term and if necessary an adjustment made if it dips under minimum wage? Interesting scenario though because in non-minimum wage cases that doesn't really happen, if you worked say from July 1 to January 31st you'd probably get paid 7/12ths of your annual salary despite having worked more than 7/12ths in terms of days/hours.

 

[Deleted member 66701]

I dealt with a similar case at an employment tribunal pre-hearing once - it's perfectly ok to pay a salary and average out each month. As long as the total hours worked per year are paid at or above the minimum wage, you're good to go. Even includes this as an example calculation on the gov.uk site:-

Example

Jeba’s contract says she must work 2,040 hours each year.

She’s eligible for the minimum wage rate of £7.38 per hour.

She gets paid monthly (12 times a year), so each pay packet covers an average of 170 hours (2,040 divided by 12).

This means she must be paid at least £1,254.60 a month (£1,254.60 divided by 170 makes £7.38) for the basic hours in her contract.

https://www.gov.uk/minimum-wage-different-types-work/paid-an-annual-salary

However other posters are correct in that on termination of employment, additional pay may be owed (or deducted if say for example they'd only worked February).

 

[dowie]

As long as the total hours worked per year are paid at or above the minimum wage, you're good to go. Even includes this as an example calculation on the gov.uk site:-

You need to read your link again, it doesn't show that and it isn't perfectly OK, it shows that the hours worked in a month must be at minimum wage as @Energize has already pointed out here:

https://forums.overclockers.co.uk/posts/32097080/

if it was just a requirement for the total hours per year then you could be below minimum some months which is the issue in the OP.

 

[Deleted member 66701]

You need to read your link again, it doesn't show that and it isn't perfectly OK, it shows that the hours worked in a month must be at minimum wage as @Energize has already pointed out here:

https://forums.overclockers.co.uk/posts/32097080/

if it was just a requirement for the total hours per year then you could be below minimum some months which is the issue in the OP.

Incorrect - read the example given. I'll highlight the relevant bit in bold for you,

Example

Jeba’s contract says she must work 2,040 hours each year.

She’s eligible for the minimum wage rate of £7.38 per hour.

She gets paid monthly (12 times a year), so each pay packet covers an average of 170 hours (2,040 divided by 12).

This means she must be paid at least £1,254.60 a month (£1,254.60 divided by 170 makes £7.38) for the basic hours in her contract.

https://www.gov.uk/minimum-wage-different-types-work/paid-an-annual-salary

Any additional hours worked (i.e. overtime) should be at minimum wage (or higher) - these additional hours should not be "averaged out".

 

[dowie]

I didn't say anything about overtime, but yeah you're right re: the average, it seems you can be underpaid in some months (on a monthly basis) and it is simply a monthly average based on yearly hours - my bad.

 

[Deleted member 66701]

I didn't say anything about overtime, but yeah you're right re: the average, it seems you can be underpaid in some months (on a monthly basis) and it is simply a monthly average based on yearly hours - my bad.

No worries. I just added overtime as an addendum in case someone did a "but what if....".

It does seem wrong on the face of it, but since when was employment law easy to understand

 

[HangTime]

It only seems 'wrong' because of the general oddity many salaried workers face of being paid the same amount each month regardless of how many working days there are in the month. Typically the more working days there are in a month, the longer then month is too so it would make more sense IMO to adjust pay on that basis each month i.e. you have to wait a lot longer for your March paycheque than your February one (unless paid prior to month end but then that just staggers the delay to the following month anyway - basically you might have to wait up to 31 days to get paid the same as when you wait 28 days)

 

[Hagar]

I have not been provided an hourly rate since 1972 when I worked in a factory. All of my salaried working life has been based on an annual income, split into 12 equal parts paid monthly. The exception being a company that did 13 equal parts and two parts were paid together at year end.