National Minimum Wage and National Living Wage - calculating minimum wage pay

The below example demonstrates how the minimum wage arrears formula can be applied to work out what arrears a worker is entitled to.

Example minimum wage arrears calculation

A 45-year-old worker was paid £250 for 35 hours worked in the pay reference period 1 December 2022 to 8 December 2022. The arrears are calculated in April 2023.

The minimum wage rates for the relevant periods are:

• £9.50 for the pay reference period 1 December 2022 to 8 December 2022
• £10.42 for April 2023

1. Work out the minimum amount the worker should have been paid in the pay reference period and identify the size of the underpayment.

• Multiply the correct rate during the period of the underpayment by the hours worked: £9.50 x 35 = £332.50.
• Deduct the amount the worker was paid: £332.50 - £250 = £82.50 underpayment.

2. Divide the underpayment by the minimum wage rate which applied at the time of the underpayment and multiply it by the current rate.

£82.5 ÷ £9.50 x £10.42 = £90.49

The worker is entitled to £90.49 in arrears.

Calculating arrears with the change of age band

On 1 April 2021, the age bands for the minimum wage rates changed, with workers aged 23 years old and over entitled to the National Living Wage. Where arrears are being calculated for a pay reference period starting on or after 1 April 2021 for someone who was aged 23 years old or over at the time, the current minimum wage rate which should be used is the National Living Wage rate for workers aged 23 years old and over. Where arrears are being calculated for earlier pay reference periods, the minimum wage rate to be used for those aged 23 and 24 years is the National Minimum Wage rate.