National Minimum Wage – Basic rate of pay when only premium rates paid

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In a judgement delivered by the London Employment Appeal Tribunal (EAT) on 25 November 2009 in the case Hamilton House Medical Ltd v Hillier, the employment judge ruled that, where an employee’s hours of work are such that only premium rates of pay are paid, the basic rate on which those premium rates are based continues to be the basic rate for National Minimum Wage (NMW) purposes.

Mrs. Hillier worked in a care home and normally worked only at nights.  She was paid at time and a third for working at nights during the week, and time and two-thirds at weekends.  An Employment Tribunal had ruled, on 31 March 2009, that Hamilton House Medical was in breach of the NMW because Mrs. Hillier’s basic rate of pay was below the NMW minimum rate.  However, the employer argued, on appeal, that, where an employee is always paid at premium rates, those rates become the employee’s basic rate and, as a result, the pay was above the NMW.

Regulation 3 of the National Minimum Wage Regulations 1999 states that, in order to check compliance with the NMW, a worker’s total remuneration must be reduced by any money payments paid in respect of

“time work … involving particular duties that is paid for at a higher rate per hour than the lowest rate per hour payable to the worker … to the extent that the total of those payments exceeds the total of the money payments that would have been payable in respect of the work if that lowest rate per hour had been applicable to the work.”

This requirement means that, where a worker is paid at premium rates, the worker’s total remuneration in a pay reference period must be reduced by the premium part of the payment before it is compared with the statutory minimum rate.

The employment judge commented that the employer’s argument, if correct, would “introduce total inconstancy into the minimum wage calculation”.  He stated that:

“The philosophy of the National Minimum Wage Regulations is clearly that an employee’s basic minimum wage before overtime enhancement or other allowances should not fall below the statutory minimum and it seems to me that it would be completely contrary to the purpose of the legislation if that obligation could be avoided simply because an employee chooses to normally work those hours when she would be in receipt of some enhancement.”

Further information:

Hamilton House Medical Ltd v. Hillier

This entry was posted on Friday, December 4th, 2009 at 15:12 and is filed under Compliance, Minimum Wage, National Minimum Wage, NMW. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.