Calculating the National Minimum Wage (NMW) isn’t as easy as you might think. Despite recent changes to the NMW, employers are still unsure of what to pay particular employees. What’s more, many employers don’t even know what the NMW rate is.
Regarding the National Minimum Wage, Ireland increased it to €9.80 on January 1st, 2019. If you haven’t adjusted to the new rate, you’re putting yourself and your business at risk.
To ensure you stay on top of your minimum wage obligations, we’ve put together a five-step process to keep you in the know.
Step 1: Is the employee entitled to receive the NMW?
For the most part, yes. That said, there are a few exceptions, including:
- Close family members of the employer.
- Workers taking part in a statutory apprenticeship.
- Young adult workers aged 18 or 19 years old.
In these cases, you need to figure out applicable adjustments.
Step 2: Determine the relevant rate of pay
No matter what, experienced adult workers must receive the National Minimum Wage rate of €9.80 per hour.
However, as mentioned above, there are groups you need to adjust the NMW for. When it comes to young adult employees, the following sub-minimum rates apply:
Rate of pay
Persons under 18 years of age
70% or €6.86 per hour
Persons who are 18 years of age
80% or €7.84 per hour
Persons who are 19 years of age
90% or €8.82 per hour
Step 3: Select a pay reference period
Employers are required to have a set pay reference period for the purposes of the NMW. Once this is established, this will be the period over which the NMW will be calculated. This time period can be up to one month but no longer. This period must also be set out in the employee’s contract of employment.
If an employee queries whether or not they have received the NMW, this pay reference period will be the timeframe over which the NMW will be assessed. In practice, this can mean that an employee could earn less than the NMW in a particular week as long as they have received at least the NMW over the entire reference period.
Step 4: What to include in pay?
The easiest calculation is gross pay divided by total hours worked. When calculating gross pay, you need to be aware it includes much more than a basic salary. Also included are shift premiums, bonuses, piece rates, commission, and the value of board (food) and lodgings (accommodation).
For board and lodgings, the following maximum amounts should be factored into your minimum wage calculation:
- €54.13 for full board and lodgings per week, or €7.73 per day.
- €32.14 for full board only per week, or €4.60 per day.
- €21.85 for lodgings only per week, or €3.14 per day.
However, the majority of premium payments (e.g. overtime, unsocial hours, weekend work, etc.), on-call allowances, additional pay for working public holidays, tips and gratuities, and subsistence/expenses are all excluded from gross pay when calculating the National Minimum Wage.
Step 5: What hours to include?
Hours is an area that causes its fair share of confusion. Employers continue to scratch their heads when it comes to calculating NMW, all because they aren’t sure what to include as actual hours worked.
Overtime travel time where it’s part of the job and time spent on training that you have approved are valid inclusions. Hours spent on standby, travelling to and from work, and time spent on leave or strike are excluded.
If you’re looking for more information, our National Minimum Wage guide is here to help.
Need our help?
If you would like further complimentary advice on the National Minimum Wage from an expert, our advisors are ready to take your call any time day or night. Call us on 1890 252 923 or request a callback here.