Calculating Total Remuneration Earned including deductions

Total remuneration in the relevant pay reference period consists of:

  • Gross pay before deductions received during that period
  • Gross pay before deductions earned during that period but paid in the next
  • Less payments and deductions that do not count towards the NMW

Examples of pay and benefits that count towards the NMW:

  • Basic salary (the gross amount)
  • Bonus, commission and other incentive payments based on performance (but not any premium paid for overtime or shift work
  • Piecework payments
  • Accommodation allowance

 Examples of pay and benefits that do not count towards the NMW:

  • Benefits in kind whether or not they have a monetary value (except accommodation allowance)
  • Loans or an advance of wages
  • Overtime and shift premia
  • Pension payments or lump sums on retirement
  • Any premium paid for overtime or shift work
  • Any allowances or payments that are not attributable to the employee’s performance, for example London weighting or a specific on-call allowance
  • Since 1 October 2009, tips and gratuities paid through payroll
  • Some payments in respect of absences

Deductions and payments

Certain sums must be subtracted from the total gross pay, for example:

  • those payments to cover the cost of tools or uniforms
  • deductions which are for the employer’s “own use and benefit”,
  • any payment or deduction in respect of the provision of living accommodation to the extent that it exceeds the accommodation allowance under the regulations.

However, certain sums should not be deducted, such as:

  • deductions from pay because of the worker’s conduct
  • deductions to cover share purchases
  • deductions for the repayment of an advance of wages or an accidental overpayment

So here, the employer will comply with the law provided the worker’s pay before these deductions or payments is at least the NMW.