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How to calculate the minimum wage

What is reckonable and what is non-reckonable?

mimimum wage calculator

This article is designed to help employers in Ireland comply with and calculate the national minimum wage applicable to their individual employees. We often get asked question such as, How do I calculate the rate per hour? What can I include as pay? What is the pay reference period? We will answer these questions and more.

The National Minimum Wage Act 2000 introduced the minimum wage to the employers and employees of Ireland. The legislation sets the minimum wage to which most workers in Ireland are entitled. The act lists categories of workers to whom a lower rate applies because of their circumstances e.g. a young person under 18. Employment Regulation Orders also set the wage rates for persons working in certain sectors.

UPDATE 2020

The national minimum wage will increase to €10.10.

Of course nothing in the National Minimum Wage Act prevents an employer from paying above the rate

 

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How do I calculate the rate per hour?

 

The easy answer is to divide the gross pay by the total number of hours worked. Care must be taken however, when deciding on what what is to be included, and what must be left out.

 

What can I include as pay?

 

The act, in its schedule,refers to this as reckonable pay components and lists them as the following:

PART 1 — RECKONABLE COMPONENTS

   
   

1.  Basic salary.

   

2.  Shift premium.

   

3.  Piece and incentive rates, commission and bonuses, which are productivity related.

   

4.  The monetary value of board with lodgings or board only or lodgings only, not exceeding the amount, if any, prescribed for the purposes of this item.

   

5.  The amount of any service charge distributed to the employee through the payroll.

   

6.  Any payments under section 18 of the Organisation of Working Time Act, 1997 (zero hour protection).

   

7.  Any amount in respect of any of the above items advanced in a previous pay reference period that relates to the specific pay reference period.

   

8.  Any amount in respect of any of the above items earned in the specific pay reference period and paid in the next pay reference period or, where section 9 (1)(b) applies, paid in the pay reference period in which the record of working hours is received or due to be received by the employer or the pay reference period immediately after that.

What must I not include?

 

The act refers to these as non-reckonable pay components and lists them as follows:

PART 2 — NON-RECKONABLE COMPONENTS

   
   

1.  Overtime premium.

   

2.  Call-out premium.

   

3.  Service pay.

   

4.  Unsocial hours premium.

   

5.  Any amount distributed to the employee of tips or gratuities paid into a central fund managed by the employer and paid through the payroll.

   

6.  Public holiday premium, Saturday premium and Sunday premium, where any such holidays or days are worked.

   

7.  Allowances for special or additional duties including those of a post of responsibility.

   

8.  Any payment of expenses incurred by the employee in carrying out his or her employment, including travel allowance, subsistence allowance, tool allowance and clothing allowance.

   

9.  On-call or standby allowance.

   

10. Any payments for or in relation to a period of absence of the employee from the workplace, such as sick pay, holiday pay, payment for health and safety leave under the Maternity Protection Act, 1994 , or pay in lieu of notice, but not including a payment under section 18 of the Organisation of Working Time Act, 1997 (zero hour protection).

   

11. Any payment by way of an allowance or gratuity in connection with the retirement or resignation of the employee or as compensation for loss of office.

   

12. Pension contributions paid by the employer on behalf of the employee.

   

13. Any payment referable to the employee's redundancy.

   

14. Any advance of a payment referred to in Part 1 of this Schedule in the specific pay reference period relating to a subsequent pay reference period.

   

15. Any payment-in-kind or benefit-in-kind, except board with lodgings, lodgings only or board only.

   

16. Any payment to the employee otherwise than in his or her capacity as an employee.

   

17. Any payment representing compensation for the employee, such as for injury or loss of tools and equipment.

   

18. An amount of any award under a staff suggestion scheme.

   

19. Any loan by the employer to the employee, other than an advance payment referred to in paragraph 7 in Part 1 of this Schedule.

What is the pay reference period?

 

As the employer you can set the pay reference period. The pay reference period, is the period from which the average hourly pay will be calculated. You can choose a week, a fortnight or a month. You cannot exceed a month.

As an employer you must outline the selected pay reference period in the statement of employment conditions which you are obliged to give to your employee within 4 weeks of their starting employment with you. This is laid out in the Terms of Employment (Information) Act 1994. For more see

 

What working hours apply?

 

The applicable working hours are the greater of:

  • The hours laid out in the contract of employment, collective agreement or similar documentation

or

  • The actual hours which the employee worked or was available for work and for which they were paid.

Included in the definition of working hours are overtime, travel time as part of the job and training time during normal working hours when authorised by the employer.

Excluded from the definition are, time spent on standby, when not at the workplace, leave, strike,lay off, or in the case of payment in lieu of notice. Time spent travelling to and from work is also excluded.

Who is excluded from the right to receive the national minimum wage?

 

The following employees are excluded from receiving the national minimum wage:

  • A person employed by a close relative. This can include, a spouse, civil partner or parent.

  • A person in a statutory apprenticeship

  • A person who is under 18. The rate applicable to a qualifying person under 18 is a reduced amount of the national minimum wage.

What if I cannot afford to pay the national minimum wage?

 

If you cannot afford to pay the national minimum wage as a result of financial difficulty, you can apply to the Labour Court for an exemption. If granted this exemption can last for between three months and one year. You can only apply for one such exemption. The exemption only applies to the national minimum wage. It does not apply to any reduced rate.

You will need to obtain the agreement of a majority of your employees to make the application to the Labour Court. Both you and the employees must agree to be bound by the ruling of the Labour Court.

You must be able to show that you will have to lay off or dismiss employees if the minimum wage had to be paid.

Protection against victimisation

 

The National Minimum Wage Act protects any worker against being victimised for requesting the national minimum wage. The employee is also protected against being dismissed for seeking their rights under the Act. They may bring a claim for unfair dismissal without the normal restrictions relating to length of service or number of hours worked per week.

Be careful if you are cutting the hours of a worker, following an increase under the National Minimum Wage Act, in an attempt to keep wages in line with previous periods. Any reduction in time must have a comparable reduction in duties or work.

What rates are applicable?

 

Under the Employment Miscellaneous Provisions Act 2018, rates for employees under 18 and those over 18 have been simplified and will be solely based on age.

Trainee rates of pay have been abolished

From 4 March 2019, the following rates have applied:

Age

Amount

% of NMW

Under 18

€6.86

70%

18 years old

€7.84

80%

19 years old

€8.82

90%

National Minimum Wage (20+)

€9.80

100%

From 1 February 2020, the national minimum wage will increase to €10.10.

 

What happens if I get it wrong?

 

If you make a mistake and pay less than the minimum wage to a qualified employee then y9u should correct the mistake immediately. If you fail to do so the employee may refer the matter to the Workplace Relations Commission (WRC). The can ask for the case to be dealt with by an inspector or an adjudicator, but not both. Before referring it to the WRC the employee must request you to correct the mistake and restore them to the correct position under the National Minimum Wage Act. You then have two weeks to resolve the matter.

 

Where can I get help?

 

If you have more questions to ask, or would like someone to check that you are compliant, please contact us using the blue button. We will contact you at a time that suits.button

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