Working time and
the minimum wage
Regulations covering working hours and
minimum wages apply to almost every
business. Working time regulations aim to
improve health and safety by controlling the
hours employees work, while it is illegal to
pay less than the minimum wage. This
briefing covers:
◆
The rules governing working hours, rest
periods, annual leave and night work
under the working time regulations.
◆
The minimum wage.
◆
How to keep your paperwork in order.
◆
How the regulations are enforced.
The working week
Central to the working time regulations is the
worker’s statutory right to a maximum average
working week of 48 hours.
A Hours worked are averaged out over a
17-week ‘reference period’.
◆
If the workers agree, the average can
be calculated over successive 17-week
periods, rather than on a rolling basis.
◆
For some special cases, the reference
period is 26 weeks.
◆
The reference period may be extended to
up to 52 weeks by agreement (eg where
work fluctuates over the year).
◆
The average must be calculated in a way
which takes into account periods of leave,
sickness and so on. For example, a worker
who has been on holiday for half of a 17week period cannot be forced to work 96
hours a week for the remainder.
◆
For workers who have been employed
for less than 17 weeks, the average is
calculated from the time the worker
started employment.
B
Working hours include any time when the
worker is at the employer’s disposal and is
expected to carry out activities for the
employer.
◆
Work-related training is counted as part
of the working week.
◆
Travel time to and from work is not
counted as working hours (but travel
as part of the employee’s duties is).
◆
Lunch breaks are not working hours (but
a working lunch is).
◆
Being on standby to be called out, if
the employee is at the place of work,
is counted as working hours. If the
employee is on call but free to pursue
disapply the limit.
Pressuring workers to agree to disapply
the limit (eg by making it clear that only
‘hard workers’ will be promoted) is a
breach of the regulations.
leisure activities, it is not counted as
working time.
The European Commission is currently
reviewing the position of workers (on call).
C
The maximum applies to almost everyone
except the genuinely self-employed.
◆
A few areas of activity are excluded,
including junior doctors, the police and
armed forces, and people who work in
some areas of transport or at sea.
Workers can be offered overtime which
takes them over the limit, but cannot be
forced to work the overtime.
Workers who regularly work overtime
which takes them over the limit must
have signed an agreement.
◆
The maximum does apply to temporary
workers.
Arrangements for such opt-outs are also
under review by the European Commission.
◆
D Workers (at the moment) can voluntarily
agree to disapply the 48-hour limit.
◆
There must be a suitable written
agreement (see 5B).
◆
Workers cannot be forced to agree to
Breaks and leave
A Workers are entitled to a minimum
20-minute rest break in each shift lasting
over six hours.
Special cases
The working time regulations allow for some
‘derogations’ which modify the rules.
A The maximum working week does not
apply to workers with unmeasured
working time or who determine their
own hours of work.
◆
B
C
B
This is a limited exclusion category but
typically includes managing executives
and family workers.
In specified circumstances, workers can
receive compensatory rest when the
demands of work do not allow the
specified breaks. These include:
◆
Activities involving the need for
continuity of service (eg hospital
services, utilities, agriculture).
◆
Activities where there is a foreseeable
surge in demand (eg tourism).
The rules do not apply in the case
of unexpected and unpredictable
occurrences which are beyond the
employer’s control.
C
◆
In specified circumstances, rest breaks can
be accumulated (see box).
◆
Adolescent workers (over the minimum
school leaving age, but under 18) are
entitled to at least 30 minutes, if they
work longer than four and a half hours.
Workers are entitled to 11 hours’
consecutive rest between shifts each day.
◆
In specified circumstances, rest periods
can be accumulated (see box).
◆
Adolescents are entitled to 12 hours’
consecutive rest each day.
Workers are entitled to one day off each
week, or two days off every two weeks.
◆
In specified circumstances, days off can be
accumulated and given later (see box).
◆
Adolescents are entitled to two days off
each week.
D All employees are entitled to four weeks’
paid annual leave.
◆
Workers are entitled to paid leave from
their first day of employment. They receive
one-twelfth of their annual leave
entitlement from the first day of each
month they work, rounded to the nearest
half-day.
◆
Bank and public holidays can form part
of the statutory leave allowance.
If there is no recognised trade union and
there are more than 20 employees, an
agreement can be made with all the
workers in a section or department.
◆
Workers who work part time are entitled
to leave accordingly. For example,
someone who works two days a week is
entitled to eight days’ holiday a year.
If there are less than 20 employees, they
may opt out of the 48-hour working week
by individual written agreement (see 5B).
◆
Pay must be based on the worker’s
average pay. For example, if the
employee’s normal weekly pay includes
For example, the sudden loss of a key
worker or breakdown of a machine.
D Collective agreements to vary details of
the working arrangements can be made
with an independent trade union.
◆
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entitled to the minimum wage.
additional payments for working unsocial
hours, so must the holiday pay.
◆
If an employee stops working for you,
they are entitled to pay in lieu of any
leave they have not taken.
Normally, workers must receive their holiday
pay when leave is actually taken. Unless
stated in the contract, employers cannot
build an allowance for holiday pay into an
employee’s hourly rate and then refuse to
pay the employee while they are on leave.
◆
B
Night work
Workers’ average pay must be at or above
the minimum wage for each ‘pay reference
period’.
◆
The reference period is the worker’s actual
pay period, up to a maximum of a month.
For example, weekly for weekly paid
workers and monthly for monthly paid
workers.
◆
Premium payments (eg overtime at timeand-a-half) cannot be included when
calculating whether the worker has been
paid the minimum wage. Only the
standard hourly rate portion of the
overtime payment can be counted.
A Night workers (who regularly work at least
three hours during ‘night time’) should not
exceed an average of eight hours in each
24-hour period, averaged over 17 weeks.
◆
◆
B
C
The averaging period can be extended by
agreement or in certain specified
circumstances.
Hours worked will depend on the type of
work the worker does.
◆
For waged workers, the hours are usually
clearly stated.
◆
For salaried workers, hours are usually a
set number of basic hours per year.
◆
For piece workers or workers who are paid
to do set tasks, the employer and worker
can reach agreement on a ‘fair’ number
of hours for the work to represent.
From October 2004 workers must be paid
the minimum wage for the hours actually
worked, or the wage must be calculated
under an amended system called ‘rated
output work’.
◆
If employees are permitted to sleep on the
premises during shifts (eg care home
workers), it is likely that the minimum
wage will apply to the whole of the time
spent at the workplace not just when they
are awake and carrying out duties.
Night workers whose work involves special
hazards or physical or mental strain are
limited to eight hours for every 24-hour
period (eg workers in the steel industry).
◆
C
Night time is a period of at least seven
hours which includes the hours from
midnight to 5am. Unless otherwise agreed
by the employer and workers, night time
runs from 11pm to 6am.
There are some exemptions in health and
public services (eg nursing homes).
Night workers are entitled to a health
assessment before being required to
perform night work.
◆
Adolescent workers are entitled to a
‘health and capacities’ assessment,
which covers the worker’s physical and
psychological abilities to do the work.
◆
Assessments should be repeated regularly.
D The value of most perks cannot be included
when calculating whether the employee is
being paid the minimum wage.
The minimum wage
◆
The value of accommodation provided
free can be included, but only up to a
value of £22.75 a week.
◆
The value of perks which can be freely
exchanged for money, goods or services
is included (eg incentives and bonuses).
◆
Tips do not count towards the minimum
wage, unless collected by the employer
and paid through the normal pay system.
A Almost all workers aged 18 and over are
entitled to the minimum wage.
◆
The minimum wage is £4.50 an hour for
those aged 22 and over (£4.85 proposed
from October 2004).
◆
There is a lower minimum wage of £3.80
(£4.10 proposed from October 2004) for
those aged 18 to 21 or those aged 22 and
over who are in the first six months of a
new job and doing accredited training (eg
a course leading to an NVQ).
◆
Freelance and temporary workers are
A minimum wage of £3 an hour is to be
brought in for 16 and 17 year olds from
October 2004.
E
There is no opt-out from the national
minimum wage.
◆
Workers cannot agree to be paid less.
◆
Workers must be paid the minimum, no
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matter how poor their performance is.
◆
◆
F
Dismissing a worker to avoid paying the
minimum wage is automatically unfair
dismissal.
Even the directors of the smallest start-up
must be able to show that they pay
themselves at least £4.50 an hour
(£4.85 proposed from October 2004).
If workers suspect they are underpaid, they
can request, inspect and copy any records
that will establish whether this is true or not.
◆
Enforcement
A The working time limits are enforced by
the health and safety authorities.
◆
B
Entitlements to rest periods, breaks and
leave are enforced by employment
tribunals and the county court system.
C
The minimum wage is enforced by the
Inland Revenue.
You must respond to a request for relevant
information within 14 days.
Paperwork
To avoid problems later on, make sure you have
accurate and up-to-date records.
A You may need to keep records to show that
you are complying with the requirements of
the working time regulations.
It has the power to demand records, enter
premises and interview employees.
◆
It may detect breaches of the minimum
wage requirements on your PAYE returns.
E
Penalties for breaches of the regulations
can be high.
◆
If you employ on a contract for a normal
‘nine-to-five’ environment, you do not
need to keep special records. Payslips that
quote hours worked are sufficient.
◆
Breaches of working time limits can lead
to improvement notices being issued.
Subsequent failure to comply can lead
to unlimited fines and imprisonment.
◆
You should keep records of night work
and any related health assessments.
◆
Employment tribunals can order unlimited
appropriate compensation payments
(limited to £55,000 where there has been
a dismissal).
◆
Failing to pay the minimum wage, failing
to keep adequate records, keeping false
records, and obstructing an enforcement
officer are all separate criminal offences.
You could be liable for fines of up to
£5,000 for any of these offences.
◆
If it is discovered that an employer is not
paying the national minimum wage an
enforcement notice will be issued. This
may be followed by a fine of £9 for each
day an employer does not comply with the
notice (for each worker).
You must keep a record of workers who
have agreed that the 48-hour limit will
not apply to them.
◆
Agreements should be in writing and
signed by the worker.
◆
Reference to an opt-out agreement should
be made in the worker’s contract.
◆
The agreement can be cancelled at any
time, but the worker must give the
employer seven days’ notice, or longer
if agreed (up to three months).
Records must be available for inspection
by the relevant authorities (see 6).
C
◆
D In practice, you are most likely to run into
problems if an employee complains.
Records must be kept for at least two years.
Former workers can require you to go back
and pay any extra owing since the minimum
wage was introduced, in April 1999.
B
This is usually the Health and Safety
Executive (HSE) for factories and the local
authority for offices, shops and so on.
You need to keep adequate pay records to
prove you are paying the minimum wage.
◆
◆
Records don’t have to be kept in a specific
format. If most of your employees are paid
well above the minimum wage, you may
not need to keep any additional records
beyond those you already keep for PAYE.
In case of dispute, you will have to prove
that you have paid the minimum wage.
Getting help
A For a free booklet on the working time
regulations, call DTI Publications (0870 150
2500).
B
A number of sources provide information
about the national minimum wage.
◆
Call the national minimum wage helpline
for ‘A detailed guide to the national
minimum wage’, and other advice
(0845 6000 678). Or visit
www.dti.gov.uk/er/nmw for further
information and signposting.
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