The rules can be complicated. This section gives a basic overview of the NMW and NLW rules and tells you where to find further information. For an overview of other rules that you may need to consider when taking on a PA, go to our dedicated employment law section.

Basic info about the NMW and NLW
NMW and NLW rates
Applying the rules
Employing a PA on an hourly basis
What if my PA lives with me?
Around the clock care
Other complex areas, including travel time

     Deductions
     Travel time and costs
     Differing pay rates
     Training time

What to do if you discover a shortfall
Minimum wage compliance
Getting help with NMW/NLW

Basic info about the NMW and NLW

Your obligations under the minimum wage rules depend on the arrangement you have with your PA.

If your PA is 1) a family member living in your home or 2) is a non-family member who lives with you as part of your family, sharing housework and leisure activities with your family, then you may not need to pay the NMW or NLW. However, it is unlikely (although not impossible) that a PA would fall into the first category because direct payments cannot usually be used to employ a close relative who lives in the same household as the person receiving care. You may fall into this category if you pay a family member who lives with you from your own money. In the case of the second category, as per this HMRC guidance, all the facts and circumstances would need to be considered. 

The rest of this section is for you if these exemptions do not apply.

Almost all employees and ‘workers’ in the UK are entitled to receive the NMW or NLW – this includes full and part-time employees, agency workers, migrant workers and casual workers. (A ‘worker’ is someone who basically undertakes to do or perform personally any work or services for another person as pat of someone else's business – see more on 'workers' on our website.)

It is not open to employees or ‘workers’ to opt out of the NMW or NLW.

You should note that if your PA is 'self-employed' they may still be entitled to the NMW or NLW if they fall in the definition of a ‘worker’.    

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NMW and NLW Rates

The minimum wage rate depends on a worker’s age and if they are an apprentice.

The NLW applies to workers aged 25 and over (and not in the first year of an apprenticeship). The NMW rates will still apply to workers under 25 and apprentices. While the NLW operates as a higher level of NMW for workers aged 25 or over, the same rules regarding things like compliance and penalties apply to both NMW and NLW.

From April 2018, the rates that you need to ensure you are paying are:

  • £7.83 for workers aged 25 and over (up from £7.50) – this is the NLW
  • £7.38 for 21 to 24 year olds (up from £7.05 per hour)
  • £5.90 for 18 to 20 year olds (up from £5.60 per hour)
  • £4.20 for 16 to 17 year olds (up from £4.05 per hour)
  • £3.50 for apprentices (up from £3.50 per hour). An apprentice qualifies for the lower apprentice rate of the NMW if he or she is under 19, or is still in the first year of his/her apprenticeship contract. Apprentices who are over 19 and not in the first year of an apprenticeship contract are paid at the NLW or the rate of NMW appropriate to their age.

Pay for minimum wage purposes is the gross pay before deduction of tax and NIC, and before other deductions from pay such as employee pension contributions.

The rate that applies depends on their age at the start of a pay period. For example, if you pay a worker weekly, at age 20 a worker is entitled to the 18 to 20 years old rate. From the first pay week starting on or after their 21st birthday, they become entitled to the 21 to 24 years old rate. So, if you pay them for a week ending on a Sunday and their birthday is on the following Wednesday – they will be entitled to the 21 to 24 years old rate from the Monday after their birthday.

It is important to remember that you must pay at least the appropriate minimum wage – you can pay more.

The rates usually change on 1 April each year.

If you receive direct payments from your Local Authority, the Department of Work and Pensions or the NHS to help you pay for your PA, they should cover increases in the minimum wage in any payments they make to you. They should include additional money because higher wages to pay may also mean things like more employer NIC to pay and higher pension contribution costs.

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Employing a PA on an hourly basis

Your PA may well be employed by you on an hourly basis, in which case the amount they need to be paid at the end of a week say, or a month (whatever their pay period is) should be worked out according to the number of hours they work.

You should make sure you correctly identify the working hours of your PA in each pay period – particularly important if your PA works outside of the normal pattern – e.g. if they start early or finish late one day.

Example

Alan works 25 hours for you in a week. He is 28 and is eligible for the rate of £7.83. This means he must be paid at least £195.75 for that week’s work (£7.83 multiplied by 25).

One Tuesday, Alan starts work one hour early to help you with something, so that week you would need to make sure you pay him at least £203.58 (£7.83 multiplied by 26).

You should note that you do not need to pay employees minimum wage for their lunch breaks or for their travel time to and from work (although you should ensure they are paid it once any travel time they do as part of their job, e.g. driving to pick up a prescription for you, is factored in – see below for more on this). See our employment law section for more information on rest breaks and working time rules. 

If your PA is paid an annual salary, then they are still entitled to the minimum wage so you will need to work out their equivalent hourly rate to see if they’re getting the minimum wage. GOV.UK contains information about how to work this out.

On GOV.UK there is also a calculator that you can use to check if you are paying the minimum wage.

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What if my PA lives with me?

It may be essential that your PA lives with you, particularly when providing 24-hour care.

If accommodation is provided by you as part of the job (including things like electricity, laundry costs etc.), some of its value can be counted towards NMW or NLW pay. You cannot count more than the accommodation offset rate which is in force at any given time.

The maximum offset rate for accommodation (from April 2017) is £7 a day or £49 a week.

If the accommodation is free, the offset rate is added to the worker’s pay.

Example

John, 27, is your carer, and you pay him £6.50 per hour for 30 hours work a week, which totals £195. You also give him free accommodation 7 days a week, which the law says is worth a notional amount of £49. This means John has earned the equivalent of £244 (£195 plus £49). If we divide this by the number of hours John has worked (30) this brings John’s pay up to £8.13 an hour which is above the minimum wage rate of £7.83.

So, if you want to employ someone aged 25 or over for 35 hours work a week and accommodation comes with the job, you could pay them £6.43 per hour and still comply with the minimum wage rules. This is because, the value of the accommodation per week is deemed to be £49, which counts towards the NLW. This essentially adds £1.40 (£49 divided by 35 hours) per hour to the worker’s wages, which brings the hourly rate up to £7.83.

No similar adjustments can be made for any meals/refreshments or other benefits that are provided by you.

If you charge more than the accommodation offset, the difference is taken off your workers pay which counts towards the NMW or NLW.

Example

Winn, who is 23 years old, is paid £7.50 an hour for 40 hours work (£300 per week). But he stays in the employer’s accommodation and the employer charges him £85 per week for his bed and board. Under the accommodation offset rules, the employer is allowed to consider £49 per week as pay for minimum wage purposes. So whilst Winn actually only receives £215 (£300-£85), he is deemed to receive £264 (£215+£49). Nevertheless, the deemed amount of wages is less than the relevant minimum wage rate for his 40 hours work, as it only amounts to £6.60 an hour (the relevant rate is £7.38).

If the accommodation charge is at or below the offset rate, it doesn’t have an effect on the worker’s pay.

The accommodation offset rate is amended on 1 April each year.

You can find more information on the accommodation offset rules on GOV.UK.

Please see our benefits and expenses section for information about the tax treatment of any live-in accommodation you provide.

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‘Around the clock’ care

If your PA provides you with 24-hour support, then things can get a little complicated when thinking about how to treat ‘sleep-in’ shifts.

Traditionally, workers may have been paid for sleep-in shifts in accordance with a daily averaging agreement or paid a flat sum for each sleep-in shift, plus an hourly rate for any time they are woken. This appeared to be allowed by minimum pay law, which states that “hours when a worker is ‘available’ only include hours when the worker is awake for the purposes of working, even if a worker by arrangement sleeps at or near a place of work and the employer provides suitable facilities for sleeping”. (see Regulation 32).

However recent case law has established that in some instances it could be appropriate to pay workers the minimum wage, for hours when they are not awake and are not roused to help a person they support. This position is reflected in the latest guidance issued by the Department for Business, Energy and Industrial Skills (April 2017) which states: “A worker who is found to be working, even though they are asleep, is entitled to the national minimum or NLW for the entire time they are at work.” 

According to the judge in the most recent case on this issue:

"A multifactorial evaluation is required. No single factor is determinative and the relevance and weight of particular factors will vary with and depend on the context and circumstances of the particular case."

They have also provided guidance on how a multifactorial evaluation is to be applied when considering whether the individual is "working" during the sleep-in period and you can find that in paragraph 44 of the judgement.

While the law in this area is constantly evolving and may change in the future, the position currently, in a nutshell, is that workers may well be 'working' for the entire sleep-in shift where they are subject to work related responsibilities – which can be taken to include instances where there is a legal or regulatory requirement for them to be on the premises (as opposed to it being convenient) or where they would be subject to disciplinary action were they not on the premises.

You may find that the particular circumstances of your PA are distinguishable from these scenarios/the most recent case law and you may well have a valid argument that the minimum wage is not be payable when they are asleep, however where there is any doubt whatsoever, you should seek legal advice. You should also do this in respect of any potentially incorrect historical position, as HMRC can look at your records on the minimum wage going back 6 years to calculate any past liability.

You may have recently heard of HMRC’s Social Care Compliance Scheme (SCCS), which is aimed at employers in the social care sector (including individual employers who have taken on their own PAs) who may have inadvertently underpaid their workers for ‘sleep-in’ shifts.

Through the SCCS, the Government is providing a voluntary opportunity for employers to identify what they owe to workers, supported by technical advice from HMRC, employers who identify arrears at the end of the self-review period will then have up to three months to pay workers and will not face further compliance action from HMRC.

We recommend that you obtain independent and professional advice as to your position before entering into the SCCS.

You can read more about the SCCS and the things you need to consider in our news piece: New Social Care Compliance Scheme launched but independent advice essential.

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Other complex areas, including travel time

It can be quite difficult to understand and apply the NMW and NLW rules to some situations that you might come across with your PA. Here we give you some tips on dealing with different scenarios that can sometimes cause difficulty, as highlighted in this HMRC report on the minimum wage for carers.

Deductions

You should be careful about making deductions from your PA's pay in respect of items or expenses that you have provided that are necessary for their employment (such as for a uniform) as these cannot bring down the pay rate below the NMW or NLW. 

Example

Worker A (over 25) is paid £8 an hour for 40 hours per week. The worker has earned £320 but then a deduction of £55 is made for a uniform that he has been given, so he only received £265 or the equivalent of £6.62 an hour, which is below the NLW.

You can find confirmation of this rule on GOV.UK.

You should also be aware that making an administration charge in respect of processing an employee’s attachment of earnings order can reduce their pay for minimum wage purposes.

Travel time and costs

You should make sure that your PA is paid at least the NMW or NLW rate for all hours worked, including travel time (which means travelling in connection with work, e.g. driving into town to pick up a prescription for you, but not travelling from their home to place of work) - and associated out of pocket expenses such as vehicle mileage.

Example 

Worker B is 35 and is paid weekly. Last week she was paid £8 per hour for 30 hours work (£240). However she spent 3 unpaid hours that week travelling in connection with work, so the minimum amount to be paid to her should be £7.83 x 33 hours - £258.39. Worker B has been paid below the NLW. Her employer needs to top up her pay by at least £18.39 so that the NLW rules are met.

If Worker B also incurred £20 of travel costs for those three hours of travelling, her pay would be taken to be £220. When we compare this to the bare minimum she should have received, £258.39, she has been underpaid by £38.39.

Differing pay rates

You should make sure that your PA's basic rate of pay meets the relevant minimum wage. You may pay them an inflated rate for working on a Sunday for example, but can’t use this to disguise a low rate for the rest of the week. 

Example

Worker C (aged 19) is paid weekly. Last week she was paid £195 for 31 hours work, which averages £6.29 an hour. On the face of it, £6.29 per hour looks like it meets the applicable minimum wage (£5.55), but actually, 8 of the hours were paid at £10 for a Sunday shift.

If we strip out the ‘premium’ amount she received for her Sunday shift, Worker C’s basic rate works actually works out at £5 which is below the minimum wage.

Training time

Where workers undergo training (for example – employment induction or skills development) the time spent on such activities is working time for minimum wage purposes where a contract of employment has started or where it is a contractual requirement for the worker to attend the training. So, if you pay £80 for your PA (aged over 25) to attend an 8 hour long food safety/hygiene course (you want to be confident in their cooking ability when they are preparing meals for you!), then you would also have to pay them at least £60 (£7.50 x 8) for their wages for the day on top of the cost of the course.

You can see what other things count as working time on GOV.UK.

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What to do if you discover a shortfall

If your PA has not been paid the correct minimum wage, he or she is entitled to be paid a sum representing the shortfall. If you discover the shortfall, you should make an additional payment to your PA representing the shortfall as soon as is practicable, as well as ensuring that future pay rates are set above the appropriate minimum hourly rate.

In calculating the amount to be paid to your PA in respect of the shortfall, you should use the current NMW/NLW hourly rate, even if the shortfall occurred at a time when the rates were lower.

If your PA discovers the shortfall, he or she can report you to HMRC (who are responsible for compliance) and/or make a claim to the Employment Tribunal.

You should be aware that correcting a shortfall may also mean that you are required to pay additional PAYE tax/NIC to HMRC on a backdated basis and pay additional pension contributions to your employees’ scheme.

HMRC have some guidance on dealing with pay arrears for tax and NIC purposes in section 1.19 of their CWG2 booklet.

Essentially, employers should deduct PAYE tax at the rates that were in operation for the years to which the arrears are attributable and in accordance with the employee’s tax code for the year and as if the additional pay had been paid at ‘week 53’ for the year.

The NIC element is worked out differently and is calculated on the basis of the year the payment is made only: it is not related back to prior years. 

If correcting a minimum wage error means that you need to pay more pension contributions, you should speak to The Pensions Regulator or the pension scheme provider concerned for further instructions.

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Minimum wage compliance

By law you have to keep records to show that you are paying your employee the minimum wage and most people rely on their payroll records to do this. Such records have to be kept for three years.

HMRC are responsible for enforcing the minimum wage. As well as reacting to individual complaints, HMRC minimum wage officers also conduct proactive risk-based enforcement – you may be interested to know that since 2014, the Government has more than trebled their annual funding of NMW enforcement, providing a total budget of £25.3m in 2017/18.

If HMRC discovers or believes there is a shortfall, it can do things like:

  • Issue a notice of underpayment requiring the employer to pay arrears;
  • Require the employer to pay of 200% of the total underpayment, or £100 (whichever is the greater), up to a maximum of £20,000 in respect of each worker identified in the notice of underpayment (the penalty is reduced by 50% if the employer complies with the notice within 14 days of its service);
  • Name and shame the employer.

The employer can appeal against any notice of underpayment if they believe that there is no underpayment or that the amount in the notice is wrong. They can also appeal against any penalty imposed by HMRC.

A few employers try and sidestep the minimum wage rules, by doing things like paying cash-in-hand so that hours and wages go unrecorded and forcing workers to say they are self-employed. However, you should know that there are also a number of criminal sanctions for employers not paying someone the National Minimum Wage or National Living Wage or falsifying payment records.

You can read more about the consequences for employers of not paying the minimum wage on GOV.UK.

You can read the Government’s updated guidance on its approach to enforcement of the minimum wage, including on the enforcement of sleep in shifts, on GOV.UK.

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Getting help with NMW/NLW

Basic guidance on the NMW and NLW can be found on GOV.UK.

There is a comprehensive employer guide to calculating the NMW and NLW produced by the Department of Business, Energy and Industrial Strategy that you may find helpful as it covers complex topics like sleeping between duties and accommodation.

If there is any uncertainty for you at all about the NMW or NLW, we advise that you contact the ACAS Pay and Work Rights helpline on 0300 123 1100 (Monday to Friday 8am to 8pm and Saturday 9am to 1pm) for further advice.

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