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Can an Employer Pay Less than Minimum Wage?

By: Chris Hogan MSc - Updated: 25 May 2018 | comments*Discuss
 
Minimum Wage Tips Staff Law Legislation

Q.

Can an employer pay less than the minimum wage if they pay a bonus?

(Mrs Amanda Brawn, 7 October 2008)

A.

The National Minimum Wage (NMW) and the National Living Wage is the minimum pay per hour most workers are entitled to by law.

Tips in the Catering Industry

This has been highlighted in recent campaigns by a couple of national newspapers in relations to the use of tips to make up the difference to the minimum wage in the catering industry. In many cases, waiters were being paid less than half the minimum wage, which is currently £7.38 for people over the age of 21.

This is legal as long as the total amount earned is equal to or greater than the minimum wage, and many restaurants told the investigating newspapers that they committed to make up that difference even if there was a shortfall. But many people were surprised that this was happening at all and the government has now pledged to look at loopholes in the Minimum Wage Law to tighten up these practises.

Although the recent fuss was with the catering industry, there is nothing in law or tax regulations about tips that makes them any different to any other bonus that are paid to staff, at least with respect to the minimum wage. Looking at the government's documentation with regard to the minimum wage, it is clear that a bonus payment is acceptable as part of a contribution to a minimum wage.

Check That Minimum Wage Legislation Applies

In other words – yes, employees can be paid under the minimum wage as long as the bonus makes up the difference. If it doesn't, then staff should take action.

The first thing to do is to make sure the minimum wage legislation applies to them. There are also a number of employment areas where the minimum wage law does not apply. One of those is live-in staff, such as nannies, au pairs and other carers, while another is people who are undertaking an apprentice or similar work-based training scheme.

Assuming that they do not fall into any category, then staff can inform the Inland Revenue if they believe that there is a shortfall, or if the bonus payment is being used to avoid another element of minimum wage legislation.

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[Add a Comment]
Aberdee - Your Question:
Ok I work in a foundry we get payed £ 7.33 an hour plus 50p an hour bonus but since the pay increase in April my flat rate has still stayed at £ 7.33 so with the national min wage going up I have took a pay cut of 50p an hour can they do that.

Our Response:
If you are being paid less than the national minimum wage, you can claim this back from your employer (from the date of the rise). You would need to speak to your employer about this directly. You can see more via the link here.
WorkingRights - 1-Jun-18 @ 3:26 PM
Ok I work in a foundry we get payed £ 7.33 an hour plus 50p an hour bonus but since the pay increase in April my flat rate has still stayed at £ 7.33 so with the national min wage going up I have took a pay cut of 50p an hour can they do that .
Aberdee - 25-May-18 @ 3:21 PM
Sams74 - Your Question:
Hi I work for a care company as a team leader. When I work until 11pm from 7pm im expected to work from home on call and only get paid £4.50 an hour for it. Im sure this isnt leg can you advise please?

Our Response:
If you are a worker aged 25 and over, and not in your first year of an apprenticeship, you are legally entitled to at least the National Living Wage of £7.83 per hour, please see link here . If you are not being paid the national minimum wage for your age and you are salaried, you may wish to speak to your employer directly regarding this. You may be entitled to claim back pay.
WorkingRights - 24-May-18 @ 2:49 PM
Hi i work for a care company as a team leader. When i work until 11pm from 7pm im expected to work from home on call and only get paid £4.50 an hour for it. Im sure this isnt leg can you advise please?
Sams74 - 23-May-18 @ 9:37 PM
If you are paid a weekly bonus that makes your weekly salary upto the minimum wage, should this bonus still be paid when you are on annual leave or can your employer withdraw this bonus and pay you your weekly salary that is below the minimum wage?
ljt - 2-May-18 @ 1:34 PM
paulc - Your Question:
My employers are saying that my holiday rate is worked out over a 12 week period from when I put my holidays in in January but since then the national living wage has gone up to £7.83 per hour but my manager is saying that my holiday pay works out at £7.67 per hour (16p per hour below the legal minimum that I should get). Are they allowed to do this and what can I do as I feel I am getting nowhere with my manager when I ask him about this. Thank youPaul

Our Response:
In this case, I'd give Acas a call as it's a bit of a grey area. The National Minimum Wage Rate increased in April, so it depends whether your employer can charge holidays to a retrospective hourly rate. Give your contract a read and then call Acas, who should be able to give more advice.
WorkingRights - 24-Apr-18 @ 10:29 AM
My employers are saying that my holiday rate is worked out over a 12 week period from when I put my holidays in in January but since then the national living wage has gone up to £7.83 per hour but my manager is saying that my holiday pay works out at £7.67 per hour (16p per hour below the legal minimum that I should get). Are they allowed to do this and what can I do as I feel I am getting nowhere with my manager when I ask him about this. Thank you Paul
paulc - 23-Apr-18 @ 4:41 PM
Hi , I work as a recovery driver on call 24 hours a day, we are provided a static caravan to stay in in between recovery jobs. I am paid a flat daily rate which equates to £5.37 a hour. I have no choice but to be self employed status.is this legalor am I entitled to minimum wage ? I can get called out anything from 1 time a day or have been 10 times a day in busy periods at all hours.
John - 1-Mar-18 @ 10:24 PM
The NMW "Top-Up" from tips is not legal, atleast as far as any legislation or case I've been able to find can establish, this appears to be a "process" gap. As in legislation doesn't protect the tips an employee receives directly, which is foolish given they are taxable...
TheNotoriousDRG - 10-Jan-18 @ 8:44 PM
Paul - Your Question:
My company has made a mistake resulting in everyone being paid more than they were meant to. This is due to be reclaimed by the company in January. However, ignoring this mistake payment my pay would be below minimum wage. Are they allowed to get away with stating that the mistake payment means I am getting paid more than minimum wage even though they are taking the money back a month later?

Our Response:
If you are being paid under the minimum wage, you need to speak to your employer directly in order to give your employer a chance to rectify the matter and bring your payment up to the National Minimum Wage rate for your age. If your employer refuses, then you may wish to give ACAS a call.
WorkingRights - 21-Dec-17 @ 12:27 PM
My company has made a mistake resulting in everyone being paid more than they were meant to. This is due to be reclaimed by the company in January. However, ignoring this mistake payment my pay would be below minimum wage. Are they allowed to get away with stating that the mistake payment means I am getting paid more than minimum wage even though they are taking the money back a month later?
Paul - 20-Dec-17 @ 5:31 PM
AlS - Your Question:
I've been working in a company since May. I'm currently working 36 hours a week but do probably 8 hours more overtime. My boss has thus far refused to draw up a contract even after all these months and pays my 150 per week. I really do not know what to do at this point.

Our Response:
Your only recourse is speak to your employer directly. Due to the fact you have only been at the company for a short while, you may still be on a probationary period. However, every employer must provide the written statement within two months of the start of employment, please see link here. I assume you are on an apprenticeship as effectively your employer is paying you under the minimum wage. You would need to check whether your employer is paying you legally via PAYE (i.e paying your tax and NI via HMRC). If your employer isn't, you have no recourse to complain. If your employer is, then I suggest you speak to ACAS to see whether you will have recourse to take your employer to a tribunal and claim back pay at minimum wage.
WorkingRights - 19-Oct-17 @ 2:16 PM
I've been working in a company since May. I'm currently working 36 hours a week but do probably 8 hours more overtime. My boss has thus far refused to draw up a contract even after all these months and pays my 150 per week. I really do not know what to do at this point.
AlS - 18-Oct-17 @ 8:31 PM
Stevie- Your Question:
I am disabled,and have been offered a job,answering a phone and trouble shooting,for £5.00 an hour.will it affect my disability living allowance,and e.s.a. Money,housing and council tax benefit,working 16 hours a week?

Our Response:
Yes, it may affect your benefits. However, £5 per hour is also below the standard national minimum wage, please see link here .
WorkingRights - 1-Aug-17 @ 2:35 PM
I am disabled,and have been offered a job,answering a phone and trouble shooting,for £5.00 an hour.will it affect my disability living allowance,and e.s.a. Money,housing and council tax benefit,working 16 hours a week?
Stevie - 1-Aug-17 @ 7:49 AM
Nat - Your Question:
Can an employer pay less than NMW, when paying a bonus?

Our Response:
You can see more via the gov.uk link here which should help answer your question.
WorkingRights - 29-Jun-17 @ 4:00 PM
Can an employer pay less than NMW, when paying a bonus?
Nat - 28-Jun-17 @ 7:32 PM
Can an employer draw a contract with an employee with an hourly wage less than minimum wages. If such contract is signed is it legally bonded
EllieF - 7-Apr-17 @ 6:52 PM
Hi my husband has just started working self employed however he's getting a weekly wage but his so called boss is now saying can only have 250£ a wk.. can he do this??? What are his rights.. thanks
Love2007 - 20-Jan-17 @ 6:48 PM
KIRSTY - Your Question:
Can a charity pay less than the living wage,i.e. £7.00 per stating as they are charity that is the rate?

Our Response:
Unless you are a voluntary worker or come under one of the categories listed in the gov.uk link here, then you should be paid the national minimum wage for your age, regardless of whether you are working for a charity.
WorkingRights - 19-Dec-16 @ 11:23 AM
Can a charity pay less than the living wage,i.e.£7.00 per stating as they are charity that is the rate?
KIRSTY - 16-Dec-16 @ 3:16 PM
Kez - Your Question:
I'm 25 and a hairdresser. I work on an hourly rate which is added up throughout the year and divided so I get the same wage each month. I also get a % of commission. I have been told that they include my commission in my wages so I cannot get the living wage. However the commission is never guaranteed and varies each month, and when I'm on holiday that means I don't get it! Are they right? If I apply for any type of credit they do not allow to count my commission as its not guaranteed every month x

Our Response:
If you are PAYE employed and not self-employed, then it’s a criminal offence for employers to not pay someone the National Minimum Wage or National Living Wage, or to fake payment records. Employers who discover they’ve paid a worker below the correct minimum wage must pay any arrears immediately. You can use the National Minimum Wage and National Living Wage calculator to work out if you are owed arrears, please see link here. If you need any further information if your employer is working within the law, I would firstly read your contract and seek advice via ACAS if you feel you are being treated unfairly.
WorkingRights - 28-Jul-16 @ 11:25 AM
I'm 25 and a hairdresser. I work on an hourly rate which is added up throughout the year and divided so I get the same wage each month. I also get a % of commission. I have been told that they include my commission in my wages so I cannot get the living wage. However the commission is never guaranteed and varies each month, and when I'm on holiday that means I don't get it! Are they right? If I apply for any type of credit they do not allow to count my commission as its not guaranteed every month x
Kez - 27-Jul-16 @ 1:51 PM
I work in the catering industry and clock over 60-70 hours a week. My yearly salary is 14,000. I have a live in with the company though I have to pay for it including council tax on top. I'm 24 years old so I'm over the 21 bracketAnd nothing has changed since the living wage came into effect. What should I do?
Rob - 14-Apr-16 @ 11:42 PM
I have worked for my company for 24 years and have always been paid a £25 weeklyAttendance bonus that is not written in my contract, if I was late or took a day off I would lose the whole £25 bonus. Now the National Living Wage has come into force my employer has put my bonus in with my wages which has put my hourly rate up and I've been told I will not be getting a pay rise, so the NLW is a farce as I'm no better off . Can my employer do this ..
Tel - 14-Apr-16 @ 6:45 PM
Natz - Your Question:
I work from home updating database information. I get paid per update and have been told that once up to speed I will be able to do enough updates per hour to earn minimum wage. So far I've been unable to, so am getting paid less than minimum wage - is this ok?

Our Response:
It depends what sort of contract you have and whether you have agreed to this i.e piece work which is a type of employment in which a worker is paid a fixed piece rate for each unit produced or action performed regardless of time, please see link: here. However, if this is not the case and you are not on this contract, then I advise giving ACAS a call to see whether your employer is working within employment law boundaries, as theoretically you should not be paid below the minimum wage.
WorkingRights - 5-Feb-16 @ 12:12 PM
I work from home updating database information. I get paid per update and have been told that once up to speed I will be able to do enough updates per hour to earn minimum wage.So far I've been unable to, so am getting paid less than minimum wage - is this ok?
Natz - 4-Feb-16 @ 8:38 PM
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