SolvedNMWM08142 | Working time: salaried hours work: excess hours calculation for pay reference periods for remainder of calculation year once basic hours exceeded: weekly example
From HM Revenue & Customs · National Minimum Wage Manual
Calculation for remaining pay reference periods in the calculation year
To calculate the hours to be treated as worked for National Minimum Wage purposes in pay reference periods following that in which the basic hours were first exceeded, all that is necessary is to add together:
the hours initially calculated using the basic hours (those hours have effectively already been worked prior to this point but have not yet been considered for National Minimum Wage); and
all the hours actually worked, or treated as worked (NMWM08100) in the pay reference period.
Example: calculation in pay reference periods following that in which basic hours first exceeded
A weekly paid worker performing salaried hours work has a calculation year from 7 January 2019 to 6 January 2020 with 2080 basic hours (resulting in 52 weeks of 40 hours being treated as worked each pay reference period).
By 24 December the worker exceeded the basic hours.
In the week commencing 30 December the worker worked 40 hours.
The hours treated as worked for week 52 will be;
| Step | Description | Action | Hours treated as worked |
|---|---|---|---|
| 1. | Hours calculated per basic hours (already worked prior to excess hours) | - | 40 |
| 2. | Hours actually worked or treated as worked in the pay reference period | + | 40 |
| - | Total hours treated as worked | = | 80 |
The adjusted number of hours to be treated as worked in week 52 is 80 hours which is the sum of (1) 40 and (2) 40. This means that as a consequence of the excess hours the employer must increase the number of hours treated as worked for the purposes of National Minimum Wage from 40 to 80 hours.
This calculation is repeated in all remaining pay reference periods in the calculation year (in this example, there are no further complete weekly pay reference periods).
The annualised hours in a calculation year for a weekly paid worker are calculated using a divisor of 52 weeks. However, a weekly calculation year may not fit exactly within the 52 week period used to ascertain the annual basic hours and so the weekly calculation year may start in the middle of a pay reference period or end after week 52.
In this example, the final day of the calculation year, 6 January 2020, is part of a weekly pay reference period that includes hours from two different calculation years. The worker has worked 8 hours on 6 January and continues working into the new calculation year starting 7 January 2020. Therefore, the worker must be paid for the excess 8 hours worked on 6 January (effectively this means that the total hours treated as worked for the final day will be 16 hours (the original 8 basic hours of the calculation year plus the 8 excess hours actually worked).
Unless a worker or employer varies their contract there will be no need to make any further calculations for this final day of the 7 January 2019 to 6 January 2020 calculation year. The employer must track cumulative totals from the 7 January 2020 onwards to ensure that they can ascertain if, and when, the worker exceeds the basic hours for the calculation year 7 January 2020 to 6 January 2021. Hours worked on 6 January 2020 will not form part of that cumulative total for the calculation year 7 January 2020 to 6 January 2021.