Please can someone help me understand the rise of the NMW, annual salaries and holiday pay -

[AmaryllisChorus]

I'm so confused. I've looked online but every site says something different and nowhere breaks it down in a way that answers my question.

I've always worked for myself - sole trader, so never had a salary or employed anyone.

The issue is:

DS is 21 and working in his first job out of uni for a small London firm as a trainee manager. Currently on 23k for a 40 hour week. He can take 4 weeks holiday a year.
He reckoned this meant he was on about £11.90ph - over NMW for his age, as he wasn't taking into account the four weeks' holiday. I said that by April, he needs an increase of £795.20 pa or he will be earning under NMW, as it rises for his age group to £11.44ph.

£11.44 x 40 hpw x 52 wpa = £23,795.2

But £11.44 x 40hpw x 48wpa = £21,964.8 - so if the holiday weeks aren't paid at an assumed 40 hours per week, he'll be earning enough.

He doesn't want to ask his boss for a rise, but I said as he is doing 40 hours per week, (10am-7pm with an hour for lunch, 5 days a week) then his boss is legally obliged to up his pay from 1st April.

I think I upset him as he thought he was doing well and now he thinks he may soon be earning under NMW, despite being a trainee manager in a very expensive city. It is an incredibly competitive profession that he has come into, and he is really lucky to have landed the job.

I want him to at very least be paid a legal salary. Am I right or have I completely miscalculated? Should I take the 4 weeks holiday out of the equation?

You're over complicating things by doing holiday pay as a separate thing. Just do it as 52 weeks pay a year.
One thing though does he get paid for 40 hours? Eg is he doing M-F 9-5 but then has 30 min lunch and 2 x 15 min breaks unpaid?

What does it say in his contract? It’s likely 35 hours a week as breaks usually aren’t paid. Does he have any reason to believe the London company would break the law? Does he have a contract and pay tax and NI?

10-7 is 9 hours. 9 x 5 = 45, therefore 40 hours obviously excludes lunch breaks.

It is just 23k / 52 / 40. Which is £11.06.

So he's currently above NMW for his age. I'd be very surprised if his employer wasn't already on top of the next increase. Why do you think they won't be?

He will actually be entitled to 5.6 weeks holiday by law. Why would you think he wouldn't automatically get an increased wage when the NMW increases?

That's a good question. I don't know about breaks. I doubt they are fixed. It's not that sort of industry. But he probably does have a coffee once or twice a day.

His hours are 10am to 7pm and he says he takes a proper lunch break. Hasn't mentioned other breaks.

But you've sort of answered my question (I think). If you work 40 hours per week and get 4 weeks holiday a year, you should divide annual salary by 52 weeks and then 40 hours pw to calculate the hourly rate. Am I right?

Whereas if he habitually only worked 35 hours pw - classic 9-5 with a lunch break, then his holiday weeks would also be calculated at 35 hrs per week?

What I don't understand is, with a salary rather than an hourly wage, how do you calculate the holidays - you're not working at all, so are you not working for 40 hours or not working for 35 hours? It has a knock on effect on what the hourly rate turns out to be.

One day's annual leave = however many hours you work in a day.

You are massively overcomplicating this.

You get holiday pay at the same rate as your normal pay when you are off. He will get 5.6 weeks holiday at his normal rate of pay for the number of hours he is contracted for.

Trying to do holiday as a separate thing is just over complicating it

Just work it out on a 52 week basis rather than dragging holidays into it

You mention he’s a trainee - is he a standard employee and not an apprentice? As the NMW for apprentices is lower.

He has the right to 5.6 weeks’ paid leave including bank holidays so you're correct not to deduct the holiday weeks.

Either way it is pretty terrible pay for London and management! I laughed at recruiters for trying to make me go for £25k jobs as a graduate and that was a few years ago so I would advise him to look for something else unless his trainee scheme has the expectation of increased salary over time (which it doesn’t sound like?).

Hi OP, get your son to use the gov calculator https://www.gov.uk/am-i-getting-minimum-wage

Sorry @AmaryllisChorus I completely missed where you'd said about him working 10-7 with an hours break.
You only need to work out holiday pay if he does a job where his hours differ either day to day or week to week. If he's contracted for 40 hours a week then his holiday pay will be the same as his 'work' pay, 1 day holiday = 1 day working. You don't need to overthink it.
If he's salaried he technically doesn't have an hourly rate however purposes such as checking he is in on or over NMW then yes as you've said.

To people asking why I think he won't get an automatic increase - it's an industry that is very glamorous and notoriously underpays or doesn't pay at all. He did an unpaid internship elsewhere for a year, which is also illegal, but he needed the experience as his degree was not in the industry.

I know an internationally famous company in this industry who year in, year out paid nothing - I mean zero, to a woman who was at the top of her game in her skills and joined them for several weeks each summer, working until midnight every day, unpaid, just so she could put this company on her CV. I thought she was an idiot to do it more than once - but people queue up to be exploited in this industry.

I don't have total faith the boss is on top of not exploiting his workers for various reasons, so want DS to keep an eye on his pay and question it if it doesn't go up.

Check his contract for his contracted hours.

Take his annual salary, divide by 52 and then divide by however many hours per week.

Ignore the holiday stuff - he'll be paid for those and it doesn't need to be calculated separately in this instance.

If he's doing a lot of OT then remuneration will need to reflect this - he shouldn't be dropping below minimum wage due to working excessive hours. If he is, that's a problem to take up with his employer.

I'd be very surprised if the company were unaware of the changes to minimum wage though - that's very basic stuff.

Holidays are part of your deal as an employee. So ignore that.
The employer will raise his salary in April, or if they don't, then he should ask about it then.

If it's a 40 hour week in his contract then holidays are 8 a day or 40 for a week's block.

5.6 weeks is the minimum legal holiday allowance but this can include bank holidays or mandated dates so maybe he only has 4 floating weeks he can pick.

You don't factor in holidays when working out to an hourly rate just the salary divided by 52 then 40.

Every company will be aware the NMW goes up every year and his contract probably mentions a yearly salary review, usually in April

There's really no need to be getting tied in knots here and worrying him about asking his boss, just wait and see.

I work for a large company that tells us end of February what our raise will be from April. My husband finds out earlier as the rise has to be accepted by the union in time for April.

Thank you. I am not sure whether his contract specifies his hours. He needs to check. I know normally salaries don't have hourly rates but legally they must comply with NMW for hours worked, and this is where I think there's a grey area which he needs to challenge if he ends up being exploited.

Yeah, do watch out for a contractual clause that says he needs to work whatever hours to ensure the work is completed, or words to that effect. He's still entitled to minimum wage for every hour actually worked.

This is the thing - remuneration needs to reflect hours worked.

The company will be on top of pay rises for its waged workers on the production line. But not necessarily for a salaried worker- that's my issue.

The rules about internships are more complicated than a blanket rule. There are circumstances where NMW doesn't apply to them.

I can understand your concerns, but approaching it in this panicked way isn't going to help.

Your son's way of calculating his hourly rate would only make sense if his holidays were unpaid.

He is definitely not classed as an apprentice?

If it gets to the stage where his salary isn't increased and it should have been, then the Acas helpline would be a good port of call before doing anything else.

https://www.acas.org.uk/national-minimum-wage-entitlement/if-an-employer-does-not-pay-minimum-wage

Loving all the NMW experts on here! There's a reason why so many big companies are named and shamed every time the list comes out, and that's because the rules are deeply technical and it's not just a case of dividing pay by hours. So many companies are NOT aware of the rules, and actually some are well aware and just take a risk around "technical breaches".
Some of the things that it would be necessary to know before it is possible to say whether this could be an issue are a) does he ever do unpaid overtime? Or is that 40 hours a week really mean 40 hours a week. 2) does he have any salary sacrifices in place (eg pension)? 3) does he need to wear anything specific to work (eg black trousers)?
From April 21 the main NMW applies to 21 year olds and over for the first time, and is going to be £11.44 an hour. Therefore you'd expect to see his pay rise from that point in time, regardless of your answers to the questions I've asked above.

Unless this is a tinpot employer, why do you think the payroll/HR/finance team are too stupid to be aware that NMW applies to their salaried workers?

Then your argument isn't about NMW. It's about him working overtime. He's paid over NMW for the hours he's contracted to work.

How many hours does he work over and above his contracted hours each month? If it's frequent excessive, then he can take it to his boss and say that the regular extra hours he's being expected to work are taking his hourly rate below NMW.

If it's just a couple extra hours every now and then, then I suspect boss will argue it comes within the 'work the hours needed to get the job done' part of his contract.

While it sounds like a glamorous sector to work in, it also appears to be rife for exploiting youngsters keen to do whatever they can to make their name.

You’re certainly right that he should be paid NMW, but unfortunately it is common in salaried positions to end up under it due to the high number of hours of unpaid overtime in certain professions.

But I wouldn’t get him worried about it now, there’s plenty of time before 1 April for his employer to sort it out, and then he can address it if there’s an issue.

But I wouldn’t get him worried about it now, there’s plenty of time before 1 April for his employer to sort it out, and then he can address it if there’s an issue.

This. You're creating upset about a hypothetical problem.

What, like these "tinpot" employers?