National Minimum Wage
Annual Increases Apply in next Pay Reference Period – Not Always 1 October
When discussing increases to the National Minimum Wage, there is often a perception that increases always apply from 1 October. This is not necessarily the case, due to what is known as the “Pay Reference Period”.
Pay Reference Period
The Pay Reference Period, as prescribed by Regulation 10 of The National Minimum Wage Regulations 1999, can be a month – although it will be shorter if a worker is paid wages more frequently.
Based on when the next wage period on or after 1 October begins, in practice this could mean that any minimum wage increase wouldn’t apply until the end of October – rather than the start: if a pay period started on 30 September, ending on 29 October, the old (previous year’s) minimum wage would apply for the work performed on the days 1 – 29 October. Only work performed on or after 30 October would attract any new minimum wage rate.
The savings involved in exploiting this clause to the maximum will often be small (at least per worker), but it is important for employers to understand that increases to the National Minimum Wage do not necessarily apply to work performed on or after 1 October each year, only to work performed in the pay reference period that starts on or following 1 October: in 2014, 1 October falls on a Wednesday, so if workers are paid weekly, based on work done Monday-Sunday, any increase to the wages wouldn’t apply to work performed until 6 October 2014. If wages are paid monthly, on the last Friday of every month (for work done up-to & including that day), the increase would probably need to apply from 25 October – the last Friday is 31 October 2014, which would take the period beyond one month. For employees that are paid every calendar month, based on that month’s work, the pay reference period – and therefore the increase in the national minimum wage – will normally start on 1 October.