Top 10 tips for dealing with the national living wage (NLW) and the national minimum wage (NMW)

Produced by Tolley
Top 10 tips for dealing with the national living wage (NLW) and the national minimum wage (NMW)

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Top 10 tips for dealing with the national living wage (NLW) and the national minimum wage (NMW)
  • Introduction
  • Avoiding the NMW pitfalls
  • 1 ― Establish which workers are within the scope of NMW
  • 2 ― Establish ‘worker types’ from the outset
  • 3 ― Count all basic annual hours properly
  • 4 ― Identify all working hours and look out for unrecorded hours
  • 5 ― Identify salaried hours employees’ annual calculation years
  • 6 ― Monitor salary sacrifice on an ongoing basis
  • 7 ― Consider which pay elements count for NMW purposes
  • More...


The national minimum wage (NMW) has been around since 1998, with NMW policy being the responsibility of the Department for Business Energy & Industrial Strategy (DBEIS). The equivalent to NMW for the over-23s is the national living wage (NLW). However, in practice, there is just one set of rules. The remainder of this guidance note will therefore refer to these obligations simply as NMW.

In March 2021, the DBEIS published an online version of its manual: Calculating the minimum wage. Although this is the primary guidance material, day-to-day responsibility for policing the system falls upon HMRC rather than the DBEIS, and further guidance may be obtained from the national minimum wage manual ― see NMWM01000 onwards.

With its increasingly tortuous complexity, and the greater number of HMRC staff tasked with undertaking NMW review checks, the last few years have seen a significant number of employers fall foul of NMW rules.

Avoiding the NMW pitfalls

Details of employers who make NMW mistakes are published periodically on a Government naming list. The precise details of how such details are reported have been the subject of debate and may be changed in future. However, currently, all employers who underpay NMW by more than £500 in total can expect to be included. So, for example, if an employer underpaid an average of £10 to each worker (this would be the total underpayment for the worker covering the last six in-date years) for a total of 51 workers across its whole workforce, the total of £510 underpaid would mean that the employer would be included in the naming list.

The informal description of this is a ‘naming and shaming’ list, and the covering narrative refers to ‘rogue’ employers. As such, both may be seen as harsh misnomers. In practice, there is little or no distinction made on the list between, say, accidental underpayments (which sometimes arise from the employer misunderstanding ‘unpublished’ NMW technicalities) and those employers who show complete disregard for the

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