An employer pays more than the national minimum wage hourly rate to all workers. Does that mean that the employer can never be in breach of the rules?

No, it does not necessarily mean that. The new minimum hourly rates from 1 October 2004 are £;4.85 for adult workers aged 22 and above, £;4.10 for those aged 18 to 21, and £;3.00 for those over school-leaving age and under 18. The hourly rate for adult workers is £;4.10 for the first six months of employment if they are receiving accredited training.

The new rate applies to the first pay reference period that commences on or after 1 October. For example, if a pay reference period for a weekly-paid worker runs from Sunday to Saturday, the first period that must meet the new rates is the one starting on Sunday, 3 October 2004.

With regard to general compliance, if an employer pays at least the minimum hourly rate for every hour worked, including overtime, the employer will never be in breach of the rules. In the case of workers who are paid piece rates for work performed under the employer's control, the overall payment calculated using the piece rate must average at least the relevant national minimum rate for the number of hours during which the work was performed.

It is possible, in certain circumstances, to pay a rate that is lower than the statutory minimum but, in such a case, the employer must fully understand the rather complex issues concerning the hours and payments that count, or do not count, towards the compliance calculation.

Where workers are not paid an hourly rate for every hour they work, employers must take care. In the following situations, it may not be possible to demonstrate compliance unless each worker's actual working hours are recorded:

• salaried workers whose salary is paid in equal instalments throughout the year, whose working hours are defined in their contracts, but who are not paid when they work extra hours, unless they never exceed their contractual annual hours
  
  
• output workers paid piece rates, or by commission, but whose work is not performed under the employer's control, unless the employer pays "fair piece rates" and meets the necessary notification requirements
  
  
• workers whose working hours are unmeasured, e.g. because their contracts do not specify their hours of work, unless the employer and worker enter into a "daily average" agreement.

The statutory requirements for demonstrating national minimum wage compliance is probably the least understood in the case of salaried workers. As long as a salaried employee (as defined above) does not work more than the hours defined in the contract and is paid a regular salary in respect of those hours, compliance is demonstrated simply be dividing the worker's annual salary by the worker's annual hours.

However, if the worker is not paid for hours worked above the annual hours, e.g. a worker contracted to work 40 hours per week but who regularly works 48 hours per week without any extra payment, those extra hours each week must be taken into consideration in order to demonstrate compliance. It is therefore necessary for the employer to keep records of all hours worked by salaried workers who are not paid for some of the hours they work.

Special statutory rules apply for salaried workers as soon as a worker has worked the contracted annual hours. It is not difficult to show that a worker with an annual salary of £;20,000, contracted to work 40 hours a week, who gets no additional pay for working more than 40 hours a week, but who works 48 hours on average over the year, will be paid below the national minimum rate in one or more months towards the end of the calculation year.

For a worked example of the compliance calculations for salaried workers, see the booklet Detailed Guide to the National Minimum Wage, published by the DTI ( at www.dti.gov.uk/er/nmw/gtmw.pdf ), from page 61 onwards, although rates shown are now out of date. When it is working, the DTI's national minimum wage calculator at www.tiger.gov.uk also demonstrates the compliance issues for salaried workers.

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