The National Minimum Wage

Two recent cases provide clarity on allowances and working time for the purposes of calculating the National Minimum Wage.

When Payments are Allowances

In Smith v Oxfordshire Learning Disability NHS Trust the EAT considered whether a sleeping in allowance counted towards the national minimum wage (NMW).

The legal background

Workers are entitled to be paid the NMW.  Under the National Minimum Wage Regulations (the NMW Regs), whether a worker has received the NMW will depend on their average hourly rate over the relevant pay reference period.  For a worker who is paid weekly, the reference period is one week, for those paid monthly the reference period is one month.

The NMW Regs provide what payments count towards the NMW and those payments which do not count.  Basic salary and commission count.  However, allowances that are not attributable to the performance of the worker in carrying out his work, or which are not consolidated into an employee’s basic pay, do not count.

The Government’s guidance on the NMW, gives examples of allowances that do not count towards the NMW if not consolidated into basic pay, which include:

  • being on call;
  • working unsocial hours;
  • performing special duties over and above the worker’s normal duties.


Mr Smith was a part-time care worker contracted to work 15-hours per week at a residential care home.  He was occasionally required to sleep at the care home to be on call for night duty (a 9.5 hour period).  He was paid £7.94 for his 15-hours contracted work and a “sleeping in allowance” of £25.  The employer’s “Sleep in Policy” provided for additional payments to be made in certain circumstances; unsocial hours’ enhancements would be paid in respect of hours worked immediately before and after a sleep in, and night work enhancements if a worker was disturbed during the night.

It was agreed that hours spent sleeping counted as hours worked, however there was a dispute over whether the sleeping in payment was included in his pay for the purposes of calculating the NMW.  He argued that it was an allowance and therefore did not count, which meant that he was paid less than the NMW.   If it was allowance it would mean his average pay would fall below the NMW for those periods in slept over.  If it was not an allowance, his pay would be above the NMW.


The EAT found that the unsocial hours and night work enhancements were allowances because Mr Smith was doing more than was required under his normal duties.  However, although the “sleeping in allowance” was described by the employer as an “allowance”, the EAT held that it was not an ‘allowance’ as the sleeping over was a basic part of Mr Smith’s job, therefore the payment counted for the purposes of calculating the NMW.


This case has helpfully clarified the NMW rules about allowances.