National minimum wage - what counts as NMW pay, benefits in kind and accommodation
What counts as national minimum wage pay - how to calculate it
The starting point is total pay, that is, the pay received by the worker before deductions, such as tax and National Insurance contributions.
Total pay for the NMW excludes payments of:
- a loan
- an advance of wages
- a pension payment
- a lump sum on retirement
- a redundancy payment
- a reward under a staff suggestions scheme
- tips, gratuities, service charges and cover charges
Note that before 1 October 2009, tips, gratuities, service charges and cover charges did count towards the NMW as long as you paid them to your workers through your payroll. They no longer count towards the NMW, regardless of whether they are paid through your payroll or are given direct to workers by customers or a tronc master.
The basic calculation for each pay reference period (PRP) is:
Total pay - deductions and payments which do not count = NMW pay
For more information on payments that are not included, see the page in this guide on what does not count as national minimum wage pay.
Particular elements of pay that count
In addition to a worker's basic pay that they receive for work done, there are other elements of pay that count towards NMW pay.
Incentive pay
Payments solely related to the performance of a worker made as part of an incentive, sales commission, merit or any performance-related pay scheme count towards NMW pay.
Bonuses
Bonus payments count towards NMW pay. For an explanation of how bonuses should be allocated to the PRP, see our guide on the national minimum wage - who must pay it and how it's calculated.
Summary of what counts towards NMW pay
Amounts paid by you, excluding items listed at the top of this page but including:
- performance-related incentive pay
- bonuses
A notional sum representing the value of accommodation can also count - see the page in this guide on benefits in kind and accommodation.
Subjects covered in this guide
- Introduction
- What counts as national minimum wage pay - how to calculate it
- What counts as national minimum wage pay - how to treat deductions from pay and payments made by a worker
- What does not count as national minimum wage pay
- Benefits in kind and accommodation
- FAQs on the accommodation offset
- Tables and examples on benefits, expenses and accommodation in national minimum wage calculations
Pay and Work Rights Helpline
0800 917 2368
Actions
- Use our interactive tool to check your worker's entitlement to the national minimum wage and calculate arrears
- Download the national minimum wage code of best practice from the Department of Business, Innovation and Skills website (PDF, 166K) - Opens in a new window
Also on this site
- Understanding national minimum wage law
- National minimum wage - the basics and who is entitled to it
- National minimum wage - who must pay it and how it's calculated
- National minimum wage - hours for which the NMW must be paid
- National minimum wage - record-keeping, calculating arrears and enforcement
