Pay

How and when payment is made?

All employees are entitled to know how and when they will be paid. An employer, should tell their employees the date in the month or day in the week that they will be paid, as well as whether they will be paid by cash, cheque or directly into their bank. Employers should tell employees this information when they first start work. If an employer has employed a temporary agency worker, it will be the agency's responsibility to pay the candidate, and therefore also their duty to let the employee know when and how. 

Details of when and how employees will be paid should be included in their contracts along with the specific rate of pay.

Payslips
Every employee is entitled to receive a detailed, written statement of pay from their employer, otherwise known as a payslip, either along with their payment or shortly before.

Workers who aren't entitled to a payslip include:

• Workers who aren't formally classed as employees, but perhaps a contractor, freelancer or 'worker'
• A member of the police force
• A crew member, merchant seaman or master who works in share fishing (and is paid a share of the profits of a fishing boat). 

Every payslip must include:

• the total wage or gross amount before deductions
• the wage actually paid or net amount after deductions
• the total amount of any part-paid wage, and the method of payment
• the wage actually paid or net amount after deductions
• the total amount of any part-paid wage, and the method of payment
• the individual amounts of any variable deductions, such as tax
• if applicable, the individual amount of each fixed deduction or the total amount of these deductions if employees receive a 'standing statement of fixed deductions', which must:
• be in writing and given to your employee before their first payslip
• include the amount and intervals of the deduction
• include the purpose and/or description of the deduction
• be updated at least every 12 months
• (Employers must give written notice of the changes that affect fixed deductions).
• Other information is not compulsory, but might be included to distinguish employee payslips or simply to provide your employee with more information:
• National Insurance number
• Tax code
• Annual or hourly pay rate
• Overtime, bonuses or tips.

Types of pay (return to top)

Salary banding
Salary or pay banding is a strategy used in some salaried companies to define the level of payment for certain jobs. Salary or pay bands, which are often used as broader terms to describe pay levels, ranges and/or job grades, tend to be part of an organised payment plan in organisations where jobs are defined by level of responsibility, experience, qualifications, time spent with the company and/or job classification. For example, entry level and/or trainee workers are likely to be paid less than workers who start in senior posts. 

Organised pay structures such as these are recognised for allowing increased control over pay at management level of an organisation, while still leaving room for employer discretion to reward good performance.

Performance-related pay
Performance-related pay is a type of pay based on rewarding employees who perform better than other others. It is used by employers to encourage harder work from teams as well as individuals. It is sometimes used to retain staff, or encourage new talent to come forward, and more often than not, it is seen as a fairer pay scheme.  

Performance-related pay schemes only work when there are clear, measurable targets agreed between employer and employee. There are two types of schemes usually adopted:

• Short term schemes, which usually pay workers bonuses or commission on sales secured. Payments vary from company to company, largely depend on the product being sold, and encourage employee performance.
• Long-term schemes, which usually offer share options to encourage company loyalty.

Problems with performance-related pay
An employer needs to ensure that the basis for which employees are paid bonuses or commission is clear, consistent and outlined in their contract. Employees may consult employers personally for further information. 

If an employee has agreed to pay an employee bonuses or commission at their discretion, they must exercise that discretion in a justifiable manner. An employer may be asked to outline their calculations in writing. Be aware that employees may have kept copies of letter or notes at meetings.

The law covers cases of unpaid bonuses under the following circumstances:

• Breach of contract / unlawful deductions from wages
• Rights to bonuses should always be detailed in an employee's contract of employment. Non-payment of bonuses detailed in a contract amounts is likely to amount to a breach of contract and an unlawful deduction of wages and an employee could claim for both, though they wouldn't be entitled to anymore than the money they have lost.
• Unlawful discrimination.

Employers are not allowed to discriminate between employees on the basis of socioeconomic/racial/ethnic backgrounds or by gender. Ideally an employer should provide detailed, consistent guidelines to their employees setting out the range and rules behind bonuses.

Sick Pay
Permanent employees are usually entitled to a form of sick pay when they take time off from work due to illness. Temporary workers are not normally entitled to sick pay. 

There are two types of sick pay:

• Company sick pay (otherwise known as contractual or occupational sick pay)
• Statutory Sick Pay (SSP).

If a company runs its own sick pay scheme, then all employees should be paid what they are due under this scheme, and details should be outlined in an employee's contract of employment. If a worker is entitled to anything under the scheme, the employer should still pay the worker Statutory Sick Pay if they are eligible. Company sick pay cannot offer less than what employees are entitled to through Statutory Sick Pay.

Company sick pay
Company sick pay schemes are generally more generous than SSP, though they vary from employer to employer. If a company does not offer a company sick pay scheme, employers should make this clear in an employee's contract of employment. 

A typical company sick pay scheme begins after a specified period of employment, such as three months. Workers would then receive their normal pay during the period they are off work, up to a pre-agreed number of weeks. For a specified period of time off sick after this, employees usually receive half-pay, and any time after that then becomes unpaid.

For employees to receive company sick pay, they are normally required to act in a certain way. For example, some employers require employees to ring and speak to their line manager before a certain time of the day. In most cases employees self-certify the first week of illness, and any time after that they are required to submit a doctor's note. Both of these practices are seen as valuable in helping to control and evaluate the amount of time off sick.

Sometimes, employers will still pay sick pay when their workers don't qualify under the company rules, or say that payments are 'at the employer's discretion'. It is important to ensure that under these circumstances, any decision to pay sick pay is free from discrimination and consistent for all employees. If an employer chooses to pay discretionary sick pay on one occasion, it doesn't necessarily compel them to pay it again in the future.

Work-related sickness
The amount of sick pay an employer pays out to their employees should not necessarily be related to the cause of their sickness, although it can be effective to have a special scheme in place for workplace injuries. 

Be aware that if employers are responsible for an employee's injuries, whether they be physical or psychological injuries (e.g. stress), then that worker may be legally entitled to make a personal injury claim. 

If an employer refuses to pay sick pay that is due to an employee, this is classed as unlawful deduction from wages and an employee may be able to make a claim before an Employment Tribunal.

Statutory Sick Pay
Workers may be entitled to SSP when they are unable to go to work due to illness. This is paid by the employer and can be paid up to 28 weeks. Be aware that if the employer already has a sick pay scheme in place, which is equal to or more than SSP, then they do not have to operate the SSP scheme. 

If an employer does not have a company sick pay scheme in place, and if an employee is working for the employer under a contract of service, irrespective of whether they only just started, they will be entitled to SSP if:

• they are off sick for at least four consecutive days (which include bank holidays, weekends and days that they do not usually work)
• they are earning at least £95 per week (from 6 April 2009) before tax and National Insurance are deducted.

If the worker has another job, they will be entitled to SSP from both employers.

SSP is only paid for the days the employee would normally have worked under their contract of employment (known as qualifying days), and not for the first three days they were off sick (known as waiting days). The qualifying days may be different each week if a worker has a varied pattern of work so they may need to consult their employer on this. These rules are the same for part-time and full-time workers.

To get SSP, an employee must tell their employer that they are sick. Most employers have their own rules about how this is done, and as an employer you should make sure all your employees are aware of these rules. Providing this is done, employers do not have to pay SSP for any days prior to their employee telling their employer they are off sick if they do not stick to these rules. Where an employer does not have specific rules, workers should always tell their employers within seven days of being off sick. If they fail to do this, employers do not have to pay SSP for any days before they are told. more

Employers cannot insist that their workers tell them they are off sick:

• in person;
• earlier than the first qualifying day or in any amount of set time;
• on a special form;
• on a medical certificate;
• more than once a week while the worker is off sick.

If required by the employer, workers may need to provide some form of medical evidence from the eighth day of their illness, which is usually a doctor's certificate. This is the strongest form of evidence, though evidence may also be provided from someone who is not a medical practitioner such as a dentist. It is up to the employer to decide whether this evidence is acceptable. If the employers have any doubts they are within their rights to ask for a medical certificate from a GP.

An employer cannot ask for evidence for the first seven days to support payment of SSP. Employers may, however, ask their employees to fill in a self-certificate of their own kind within those seven days, or a form known as SC2, available at any doctor's surgery or from the HMRC website.

The standard rate for SSP is £79.15 per week. Employers can work out a daily rate if necessary by dividing the weekly rate by the number of days their employee would normally work for that week. For working out the daily SSP, the week begins on a Sunday.

SSP is usually paid on the standard payday along with normal earnings. Like some other types of pay, it is subject to tax and National Insurance contributions, unless an employee only receives their SSP earnings and these aren't high enough for them to pay tax.

If an employee cannot receive SSP or their SSP has ended, the employer is responsible for giving the worker form SSP1. Employers must state on the form why SSP has not been paid or why it is ending, as well as the last day it was paid. Form SSP1 is used to support a claim for Employment and Support Allowance. If an employee is sick after 28 weeks of company sick pay, or if this ends earlier and they are not entitled to SSP, the employer must give your worker form SSP1 so they can claim.

Employment and Support Allowance.
There are two versions of the form, one that can be printed off and completed using a pen, and one that can be completed online and printed. 

Temporary agency workers and SSP
Providing temporary agency workers meet the qualifying conditions for payment, SSP is payable to them just as it is payable to classified employees.  It is payable while they are working on an assignment or under contract with their agency. Be aware that employers cannot end an employee's contract of service to avoid paying them SSP. 

Extra facts about SSP
SSP can affect some other benefits and payments that workers may be entitled to.

• If a worker goes into hospital, SSP isn't affected.
• If employees are working abroad, they may still be able to get SSP if an employer pays National Insurance contributions for them.
• If an employee goes abroad on holiday, they may still be able to claim SSP if they can prove that they are still ill.
• Workers serving in the Armed Forces cannot get SSP, but members of their families may be entitled to it.
• SSP and insolvency.
• If an employer does not pay SSP because they are insolvent, employees will be paid by HMRC providing the employer has been formally declared insolvent. They will being paying the worker from and including the week of insolvency, any payments before then must still be paid by the employer. 

Be aware that employees may contact the HMRC for advice if an employee disagrees with your decision not to pay them SSP.

Holiday pay
Every worker is entitled to at least 5.6 weeks' paid annual leave (28 days for someone working five days a week). Employers reserve the right to control when leave is taken as well as whether it includes bank holidays. There is a minimum right to paid holiday, though employers may offer more than this if they wish. 

Holidays can be built up as soon as an employee starts work, and every worker is entitled to their normal pay on the days they are absent. When an employee leaves their job, they are still entitled to any holiday they haven't already taken, and they should continue to receive holiday pay throughout ordinary and additional maternity/paternity/adoption leave. Part-time workers are entitled to the same level of holiday pro rata.

In order to qualify for the right to annual leave the employee needs to be classed as a worker.

Contractual holiday rights
Employers can give their employees more than the minimum 5.6 weeks' leave as part of the terms of their employment. This should always be made clear in an employee's contract of employment. Under these circumstances, employers make their own rules, though they are not allowed to give their employees less than the legal minimum overall. 

If a contract does not state any additional holiday, then workers are not entitled to additional holidays paid or unpaid.  

Public and bank holidays
There are bank and public holidays in England and Wales, nine in Scotland and ten in Northern Ireland. Workers do not have any statutory right to paid leave on these days. If employers do give paid leave, it may count towards employees' minimum holiday entitlement. Workers are also not entitled to an enhanced pay rate on these days. Employers who do give either an extra holiday to account for these days or pay enhanced rates should always state these terms in an employee's contract of employment. 

Where part time workers are given time off on bank and public holidays, this leave should be given pro rata, even if the days do not fall on their usual work days.

Be aware that if employers do not give their employees the minimum amount of paid holidays they are entitled to, they make complain to an Employment Tribunal.

Pay for over-time and sleep-ins
Neither permanent nor temporary agency workers are legally entitled to enhanced pay for overtime work or for sleep-ins. Employers may increase the rate to time and a half or double time if they wish, and they may have a set rate for sleep-ins. This should always be included in the worker's contract of employment. 

Pay for shift and rota work
For workers doing shift or rota work, where the times of day or hours vary, a week's pay is calculated by working out the total number of average hours worked at an average pay rate over 12-weeks. At the start of the 12 week period, the first working day is a Monday. 

Pay deductions (return to top)
All employees and workers are protected from employers making unauthorised deductions from their pay and wages. Legally, employers can only deduct pay in certain situations which must be set out in the employees' contract of employment. Also protected are:

• apprentices
• those working under a contract for services
• Crown servants
• anyone who works on board a UK-registered ship (unless they work mainly outside Great Britain, they are not usually a resident here or are employed under merchant shipping legislation).

The difference between pay and wages
How much you pay a worker each week or month and their wage, are actually two different things. Pay is the basic amount they should be paid, whereas wage is the overall amount there are given in connection to their job. 

Wages therefore include:

• fees, bonuses, commission, holiday pay, etc.
• statutory payments (such as SSP)
• vouchers or gift tokens of fixed value that can be exchanged for money, goods or services.

Wages do not include:

• advances on wages or loans
• expenses
• pension or redundancy payments
• tips and gratuities
• payments in kind
• lump sums on retirement or in compensation for loss of office.

Employers can only make deductions from an employee's pay or their wages in certain circumstances. Employers are not allowed to make deductions from pay or wages unless:

• it is required or allowed by law, (such as National Insurance, income tax or student loan repayments)
• the deduction is a result of statutory disciplinary proceedings
• there is a statutory payment due to a public authority
• the employee agrees to the deduction in writing
• the contract of employment permits the employer
• the employee has not worked because they have been taking part in strikes/industrial action
• the deduction is to recover an earlier overpayment of wages or expenses
• or the deduction is the consequences of a court order or Employment Tribunal decision.

When an employer informs the employee in writing of the deduction(s), they must also detail the full amount the worker owes, and make a demand for payment.  A deduction must not reduce a worker's pay below NMW (except a limited amount for accommodation). This applies even if the employee gives their permission.

An employer is entitled to make a deduction from something that does not count as an employee's pay or wage (such as a redundancy payment), but be aware, employees may be able to make a claim for breach of contract if they are entitled to the payment under their contract of employment.

For an employee to have agreed the deduction in writing, they must do this before you decide to make the deduction. If an employee's contract allows the employer to make wage deductions, the employer must give the employee either a written copy of that part of the contract or a written explanation of it before you make any deductions.

Special rules for retailers
Retailers, employees have extra protection against their employers making deductions from their wages. If the till is short (shortfall) or there is a stock shortage, the employer is not allowed to take more than 10 percent of employees' gross wages for a pay period. If 10 percent isn't enough, then the employer can continue to take money from wages, but only on subsequent employee paydays.

When employees leave their jobs
If an employee decides to leave their job, they are normally entitled to be paid right up until the date they finish. If an employer intends to legitimately hold back an employee's pay for any reason, this should be clearly stated in their contract. 

Be aware that employees may be entitled to make a constructive dismissal claim if they are forced to resign as a result of the employer refusing to pay them, although they will be required to prove that they were constructively dismissed.

Notice pay 
If an employee is leaving their job, they are usually entitled to pay and benefits during their notice period. This should be set out in their contract of employment. 

Regardless of whether or not the contract sets out the number of hours a worker is expected to work, the worker should still be entitled to be paid a minimum hourly rate during their period of notice for any time that they are:

• off work sick
• on holiday
• temporarily laid off
• on maternity, paternity or adoption leave
• ready and willing to work, but not given any work by their employer.

National Minimum Wage (return to top)
The National Minimum Wage, often abbreviated to NMW, is the minimum amount workers in the UK are entitled to per hour, depending on age. From 1st October 2009, the following workers are entitled to the following amounts. 

Workers of compulsory school leaving age: Not entitled to NMW.

• Workers aged 16-17, above school leaving age but under 18  £3.57
• Workers aged 18-21 £4.83
• Workers aged 22 and above £5.80.

Almost all workers above school leaving age are entitled to the NMW. This is irrespective of when or how they are paid, whether they work full or part time, where they work in the UK, what premises they work from or the size of the employer. They are also entitled to NMW even if they sign a contract agreeing to be paid less.  This has no legal authority and employers remain compelled to pay their workers the full amount specified above.

Most employees are also entitled to a written document which outlines how their pay is calculated, as well as their pay records (which have to be produced within 14 days of the employee sending a written request, or else on some other day pre-agreed with the employee). Additionally, the employee is allowed to take a witness to view their pay records (as long as it is made clear that they will be doing so in the written request) and they can make copies of the records if they feel it is appropriate.

Beware....

• If an employer is caught not paying their employee properly, they could be ordered to pay back any unpaid amounts. As of 6th April 2009, employees are entitled to have all outstanding payments paid back at the current NMW rate, even if it is higher than the rate in force at the time when they should have been paid. If an employer fails to pay an employee their arrears or outstanding payments, the case could be brought to an Employment Tribunal or Civil Court.
• If an employer does not allow an employee to see their pay records, and the employee complains to an Employment Tribunal and wins their case, the employer will be ordered to pay 80 times the NMW in force at the time the order was made.

For help and advice on the NNMW contact the Pay and Work Rights Helpline on 0800 917 2368.

Workers entitled to the NMW
Most workers are entitled to NMW, but there are some rare circumstances when a worker might not be. 

All those who are entitled to NMW include:

• Workers with an employment contract - otherwise known as employees.
• Workers without an employment contract but who are not self-employed, including:
• Agency workers, where the agency is seen as the employer.
• Apprentices, where they are aged 19 or over and have completed the first year of their apprenticeship. Apprentices may be workers with contracts of apprenticeship or workers involved in training schemes who are treated as if they have a contract. These schemes are:
• Apprenticeships or Advanced Apprenticeships in England.
• Skill-seekers or Modern Apprenticeships in Scotland (but only when they are arranged for an employee to gain a Scottish Vocational Qualification Level 2/3 or a National Vocational Qualification Level 2/3).
• Job-skills Traineeships or Modern Apprenticeships in Northern Ireland.
• Modern Apprenticeships or Foundation Modern Apprenticeships in Wales.
• Foreign-born workers working in the UK, who are legally allowed to work in the UK, and regardless of the length of their contract or placement or whether their employer is based here.
• Piece workers, paid by the number of tasks they perform or items they produce paid at least the NMW for every hour they work, or else a 'fair piece rate' for each task performed or item produced.
• Agricultural workers - they are entitled to the Agricultural Minimum Wage (AMW) which is higher than the NMW.
• Commission workers - e.g. sales people paid commission-only, are actually entitled to be paid at least the NMW for the number of hours they work.
• People who work from home (unless they are running their own business).
• Workers with a disability (except for when they are working for therapeutic reasons and have no contract or rights to payment).
• Seafarers who work or usually work in the UK, irrespective of where their ship is registered, as well as those working on UK-registered ships who may move around to other places in the world.
• Offshore workers who work or usually work in UK, in UK territorial waters or in the foreign sector of the continental shelf (such as oil rigs). Excludes workers on ships that are dredging, fishing or in course of navigation.
• People taking part in a programme supported by the European Social Fund and who have contracts of employment with their employers (it doesn't apply if the worker is on a work trial lasting a maximum of 6 weeks).
• Trainees or workers on a period of probation, although there are sometimes exceptions for apprentices or workers on training courses.
• People who usually work in the UK but are working abroad temporarily.
• Workers taking part in government employment schemes, although some may get benefits instead of NMW.

Who is not entitled to NMW?
A small minority of workers are not entitled to the minimum wage. 

These include:

• Self-employed workers (if you believe that one of your workers is self-employed, it will be up to you to prove that they are self-employed at an Employment Tribunal or civil court).
• Volunteers, regardless of what they are doing the voluntary work for, unless the work arrangements amount to a worker's contract.
• Voluntary workers, who are different to volunteers in that they must have an employment contract to perform work for a charity, voluntary organisation or fund raising body.
• Work experience students whose placements are less than a year.
• Apprentices under the age of 19, or over 19 but in the first year of their apprenticeship.
• Company directors, who by law, are 'office holders', exceptions are directors who also have an employer contract.

People who are taking part in certain government schemes at pre-apprenticeship level, which include:

• Entry to Employment or Programme Led Apprenticeships, in England
• Get Ready for Work, in Scotland
• Access, in Northern Ireland
• Skill-build, in Wales.

Those taking part in government employment programmes which are meant to provide workers with training or experience. People on the following programmes:

• European Community Leonardo da Vinci,
• Youth in Action
• Erasmus
• Comenius

Workers who are either members of their employers' family, living in their employers' households and participating in household work and leisure activities, or helping run their employers' home or business.

• People who do jobs for their friends or neighbours under informal arrangements and with no contractual obligation to work.
• Members of the armed forces, including reservists and those who assist the cadet forces as Cadet Force Volunteers.
• Share fishermen, who share in the profits of the fishing boat or vessel rather than receiving a wage.
• Prisoners working under prison rules and workers detained under immigration laws doing work under removal centre rules.
• People doing work in a religious or other community, which isn't a registered charity, independent school or other establishment providing further education. 

Dismissals relating to NMW
If an employer dismisses one of their employees for certain reasons related to the NMW, that dismissal will be automatically unfair and a worker can complain to an Employment Tribunal. These reasons include:

• an employee took or said they would take action to receive payment due to them under the National Minimum Wage Act
• the employer, was prosecuted as a result of this action
• an employee qualifies, will or might qualify in the future for NMW.

Employees can also complain to a Tribunal if they believe they are being victimised in some way, as a result of the above reasons.

Employment Status

The definition of 'employee' and 'worker' differs slightly. Generally if rights apply to a 'worker' they also apply to an 'employee'. Employees also have some additional employment rights. (More Information)