NMWM08143 - Working time: salaried hours work: excess hours calculation for pay reference periods for remainder of calculation year once basic hours exceeded: two-weekly example
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 two-weekly paid worker performing salaried hours work has a calculation year from 1 April 2019 to 31 March 2020 with 2080 basic hours (resulting in 26 two-weekly periods of 80 hours being treated as worked each pay reference period).
By 12 March the worker exceeded the basic hours.
In the fortnight commencing 16 March the worker worked 80 hours.
The hours treated as worked for period 26 will be;
| Step | Description | Action | Hours treated as worked |
|---|---|---|---|
| 1. | Hours calculated per basic hours (already worked prior to excess hours) | - | 80 |
| 2. | Hours actually worked or treated as worked in the pay reference period | + | 80 |
| - | Total hours treated as worked | = | 160 |
The adjusted number of hours to be treated as worked in period 26 is 160 hours which is the sum of (1) 80 and (2) 80. 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 80 to 160 hours.
This calculation is repeated in all remaining pay reference periods in the calculation year (in this example, there are no further complete two-weekly pay reference periods).
The annualised hours in a calculation year for a two-weekly paid worker are calculated using a divisor of 26 periods. However, a two-weekly calculation year may not fit exactly within the 26 two-week period used to ascertain the annual basic hours and so the two-weekly calculation year may start in the middle of a pay reference period or end after period 26.
In this example, the final two days of the calculation year, 30 and 31 March 2020, is part of a two-weekly pay reference period that includes hours from two different calculation years. The worker has worked 8 hours on 30 and 31 March and continues working into the new calculation year starting 1 April 2020. Therefore, the worker must be paid for the excess 16 hours worked on 30 and 31 March (effectively this means that the total hours treated as worked for the final day will be 32 hours (the original 16 basic hours of the calculation year plus the 16 excess hours actually worked).
Unless a worker or employer varies their contract there will be no need to make any further calculations for the 1 April 2019 to 31 March 2020 calculation year. The employer must track cumulative totals from the 1 April 2020 onwards to ensure that they can ascertain if, and when, the worker exceeds the basic hours for the calculation year 1 April 2020 to 31 March 2021. Hours worked on 30 and 31 March will not form part of that cumulative total for the calculation year 1 April 2020 to 31 March 2021.