Frequently Asked Questions

What must I pay my employees?

By law, you must pay a minimum amount for the hours they work. This is called the:

  • National Living Wage (NLW) if you’re aged 23 or over.
  • National Minimum Wage (NMW) if you’re aged under 23 or an apprentice.

Anyone who is employed as an employee or worker must get the National Minimum Wage or National Living Wage.

This is whether they are:

  • full time
  • part time
  • doing training essential for the job
  • working in a small or ‘start-up’ business

It also applies to:

  • agency workers
  • agricultural workers
  • apprentices
  • casual labourers, for example someone hired for one day
  • casual workers
  • employees on probation
  • foreign workers
  • home workers
  • offshore workers
  • seafarers
  • workers paid by commission
  • workers paid by the number of items made (piece work)
  • zero-hours workers

The only types of work that are not covered are those who are:

  • self-employed or a volunteer (by choice)
  • a company director
  • in the armed forces
  • doing work experience as part of a course
  • work shadowing
  • under school leaving age

Current rates:

Wage Rates Current rate (from 1 April 2021
Age 23 and over (National Living Wage) £8.91
Age 21 to 22 £8.36
Age 18 to 20 £6.56
Under 18 £4.62
Apprentice £4.30

The government reviews minimum wage rates every year and they’re usually updated in April.

There are times when employees or workers will be entitled to a higher minimum wage rate, for example:

  • if the government increases the rates (usually in April each year)
  • if an employee or worker turns 18, 21 or 23
  • if an apprentice turns 19, or finishes the first year of their current apprenticeship

Who gets the apprentice rate?

Employees are entitled to the apprentice rate if they are an apprentice aged:

  • under 19
  • 19 or over, and in the first year of their current apprenticeship agreement

If they are 19 or over and have completed the first year of their current apprenticeship, they are entitled to the minimum wage for their age.

Does commission count towards the minimum wage?

Yes, commission also counts towards the minimum wage and you must ‘top up’ their pay if they have not made enough commission to earn the minimum wage.

What can be deducted from the minimum wage?

You are allowed to make some deductions that could leave them with less than the National Minimum Wage or National Living Wage in their take-home pay. This includes:

  • tax and National Insurance contributions
  • paying back an advance or overpayment
  • pension contributions
  • trade union fees
  • a charge for accommodation provided by the employer

Some pay deductions and work-related expenses cannot reduce their pay below the minimum wage.

These include:

  • tools
  • uniforms
  • travel costs (except getting to and from work)
  • training courses

Important – please note:

It’s against the law to pay below the National Minimum Wage or National Living Wage or to falsify pay records.

Anyone can report an employer to HMRC (HM Revenue & Customs) for not paying the minimum wage and the initial report can be anonymous.

If HMRC finds that an employer has not paid at least the minimum wage, they can send a notice of arrears plus issue a penalty for not paying the correct rate of pay.

HMRC can also take employers to civil court for not paying the National Minimum Wage or National Living Wage. The maximum fine for non-payment is £20,000 per worker. Employers who fail to pay can be named publicly and banned from being a company director for up to 15 years.

Employers can also be taken to an employment tribunal or civil court if an employee or worker feels they have:

  • not been receiving the National Minimum Wage or National Living Wage
  • been dismissed or experienced unfair treatment (‘detriment’) because of their right to the National Minimum Wage or National Living Wage
  • been discriminated against because their age means they are entitled to a higher minimum wage rate

Do I have to provide a contract of employment to my employee?

Anyone legally classed as an employee or worker has the right to a written document ‘statement of particular’ summarising the main terms of their employment and everything in a written term must follow the law. Agency workers also have the same right to written terms as other workers and employees.

This document can also be referred to as an ‘employment contract’ or ‘contract of employment’, but by law, a contract of employment can be broader than a ‘statement of particular’.

These documents are a legal relationship between an employer and an employer.

Written terms must be provided:

  • no matter how long the person’s employed
  • on or before the person’s first day of work

An employment contract begins when the employee starts work, even if there’s nothing in writing.

The contract might begin even earlier if all the following apply:

  • someone accepted the job offer verbally or in writing
  • the offer was unconditional, or the person met all the conditions (for example, the employer was satisfied with their references)
  • the employer set out the terms of the job in a clear and definite way, verbally or in writing

What information must I include?

An employment contract is made up of:

  • specific terms agreed in writing (‘express terms’), such as the employee’s pay and working hours
  • terms that are part of employment law (‘statutory terms’)
  • terms too obvious to be written (‘implied terms’) – it can still be a good idea to put these in writing, so everyone’s clear about their rights and responsibilities
  • terms put into the contract from other sources (‘incorporated terms’) such as a staff handbook or an agreement affecting many employees

Information in the contract must follow the law.

There are some terms that are so obvious that they do not have to be written (such as not stealing from an employer). Even if they’re unwritten, these types of terms are often crucial for an effective working relationship between an employer and employee.

To prevent misunderstandings, it’s still a good idea for you to make the following clear (for example, by writing them in an employee handbook):

  • the standards of behaviour expected from your employees
  • what happens if these are not met

You also need to be aware that a ‘custom and practice’ terms will often be unwritten but could also still apply to an employee. For example, an employee could expect a Christmas bonus of £100 this year if you have paid that annually for the last 10 years, to everyone in your business.

To prevent misunderstandings, it’s still a good idea for you to put specific custom and practice terms into writing. For example, that getting a Christmas bonus depends on the business’s profit in the latest financial year.

As an employer you might also wish to state that an employee cannot take certain actions during their employment or once it ends. For example, after the employee has left, preventing them from contacting the business’s customers for a certain time.

These types of terms are known as ‘restrictive covenants’. They will not usually be legal unless they’re clear, specific and time restricted. Even then, this area of the law can be complex, and we therefore advise you seek further advice before including restrictive covenants in contracts.

What must be included in these written terms?

The following must all be included:

  • the employer’s name
  • the employee or worker’s name
  • the start date (the day the employee or worker starts work)
  • the date that ‘continuous employment’ (working for the same employer without a significant break) started for an employee
  • job title, or a brief description of the job
  • the employer’s address
  • the places or addresses where the employee or worker will work
  • pay, including how often and when (for example, £1,000 per month, paid on the last Friday of the calendar month)
  • working hours, including which days the employee or worker must work and if and how their hours or days can change
  • holiday and holiday pay, including an explanation of how its calculated if the employee or worker leaves
  • the amount of sick leave and pay (if this information is not included in the document, the employer must state where to find it)
  • any other paid leave (if this information is not included in the document, the employer must state where to find it)
  • any other benefits, including non-contractual benefits such as childcare vouchers or company car schemes
  • the notice period either side must give when employment ends
  • how long the job is expected to last (if it’s temporary or fixed term)
  • any probation period, including its conditions and how long it is
  • if the employee will work abroad, and any terms that apply
  • training that must be completed by the employee or worker, including training the employer does not pay for

As well as providing written terms it’s a good idea for you to put the following in writing, so everyone’s rights and responsibilities are clear:

  • the job offer
  • how the employee will be paid (for example, pay will go straight into the employee’s bank account)
  • the standards of behaviour you expect from your employees and what happens if these are not met

What are my obligations in relation to holidays?

Employees have the right to paid holiday (‘statutory annual leave’) whether they work:

  • full time
  • part time
  • under a zero-hours contract

The amount of time they will get depends on:

  • how many days or hours they work
  • any extra agreements they have with you

They build up (‘accrue’) holiday from the day they start working, including when they are on:

  • a probationary period
  • sick leave
  • furlough
  • maternity, paternity, adoption or shared parental leave

What is their entitlement?

They will be entitled to 5.6 weeks’ paid holiday (statutory annual leave) a year and can be stated as days or hours within their written terms.

This 5.6 week’s legal minimum holiday is usually made up of 4 weeks plus the annual bank holidays. This is often referred to as 20 days (4 weeks) plus 8 bank holidays = 28 days (based upon a 5-day full time worker). However, this can be calculated in other ways dependent on an employees contracted days or hours.

As an employer you can choose to give more holiday than the statutory entitlement. Your written terms should say how much holiday they will get.

If your employee works part time, does shift work, has term-time working or has a zero hour contract they are also still entitled to 5.6 weeks’ paid holiday, just in proportion to the hours you work (‘pro rata’).

If you give your full-time employees more than the statutory annual leave (for example, 6 weeks), then part-time employees must get the same, calculated pro rata.

If you’re self-employed (run your own business), you’re not usually entitled to paid holiday, but it could depend if you’ve been employed on a contract. It’s a good idea to check your employment status to see what your entitlement is, and we can help you with this if needed.

What is their entitlement?

When an employee or worker takes holiday, they should get the same pay when they’re on holiday as when they’re at work – whatever their working pattern.

For calculating holiday pay, a week usually starts on a Sunday and ends on a Saturday and you should calculate their holiday pay from the last full week that they worked.

Fixed Hours – If their working hours do not vary (part time or full time) their holiday pay will be calculated using their usual pay rate. For example, if they work 37 hours every week and get paid £400 a week, when you take a week’s holiday, you must get paid £400.

No Fixed Hours – If their work has no fixed or regular hours, their holiday pay will be based on the average pay they got over the previous 52 weeks. For example, if they do casual work on a zero-hours contract or shifts that change without a fixed pattern.

If for any of the 52 weeks they got no pay at all, use an earlier week in its place for calculating holiday.

If they got a small amount of pay for a week, for example Statutory Sick Pay, you should use another week where they received their usual pay for calculating holiday. This is because they should get paid the same when they are on holiday as when they are at work.

You should only count back as far as needed to get 52 weeks of their usual pay. If necessary, you can look at the pay they got over the previous 104 weeks, but no further.

In the first year of their job – If they have not yet been employed for 52 weeks, you should look at how many full weeks they have been employed for. For example, if they have been with you for 26 full weeks, you should look at the average pay they got during those weeks to calculate their holiday pay.

Overtime, commission and bonus – If they regularly get paid overtime, commission or bonuses, you must include these payments in at least 4 weeks of their paid holiday.

Some employers might include overtime, commission, and bonus payments in their full 5.6 weeks’ paid holiday (statutory annual leave), but they do not have to. This is because the law on overtime, commission and bonus payments being included in holiday pay is based on the EU Working Time Directive, which is 4 weeks’ holiday only.

Can I just pay my staff for their holidays even though they are not taking time off?

Unfortunately not, they must get paid for their holiday when they take it.

If you are spreading their holiday pay over the year or adding an amount on top of their hourly rate, this is known as ‘rolled-up’ holiday pay and you should also not do this.

Can an employee request to take holidays whilst they are off sick?

Yes, an employee can take holiday whilst off sick. For example, if they:

  • are not physically able to work, but physically able to take a holiday
  • have a mental health condition that might be helped by a holiday

It’s up to an employee to request holiday while off sick. An employer cannot force an employee to take holiday while off sick.

If you approve the employee’s holiday request:

  • sick leave can be paused while the employee takes holiday
  • Lthe employee should get holiday pay while they are on holiday

After the employee has taken the holiday, sick leave can continue if they’re still not well enough to return to work.

Can an employee go sick whilst on holiday?

Yes, an employee can report their sickness to their employer if they want to take any holiday as sick leave.

In this case the employee can:

  • get sick pay for the time they were sick (as long as they are entitled to sick pay)
  • keep the time they were sick to use as holiday another time

How much notice must an employee give me to leave my business?

The statutory notice periods are as follows:

Statutory Notice to Employer Amount
Under 1 month’s service None
1 month + 1 week

However, please always check your written statement of particular / contract of employment for clarification as it may contain a contractual notice period rather than a statutory notice period which may override this guidance.

How much notice must I give an employee?

The statutory notice periods are as follows

Statutory Notice to Employer Amount
Under 1 month’s service None
1 month to 2 years 1 week
1 year to 12 years 1 week per full year of employment
12 years + 12 weeks

However, please always check your written statement of particular / contract of employment for clarification as it may contain a contractual notice period rather than a statutory notice period which may override this guidance.