Salaried hours contracts – how up to date is your knowledge?

11 May 2017

Salaried hours contracts continue to come under scrutiny and serve as an opportunity, if one were needed, for us to highlight the importance of remaining up to date with the latest guidance from the Department for Business, Energy and Industrial Strategy (BEIS).

A news piece in the Telegraph reminds us how costly an error can be caused by underpayments of pay made under salaried hours contracts.

“Clearly this is very disappointing, not least because the vast majority of payments to affected Partners and former Partners relate to technical underpayments rather than actual underpayments of their contractual pay”, said chairman Sir Charlie Mayfield.

Employers often make use of salaried hours contracts to provide their employees with a steady and consistent income stream throughout the year where their working hours or weeks may vary either due to seasonal demands or term time working.

The latest guidance on calculating the Minimum Wage – which has taken on even greater importance since the increase in hourly rates brought in through the National Living Wage, was last updated in April 2017 – have you taken a look recently?

To be a salaried-hours contract, the contract between you and the worker should set out:

  • a basic number of hours for which the worker is to be paid (for example 2,000 hours)

  • that the worker is entitled to an annual salary

You do not have to show the total basic hours for a complete year but it is better to do so. However, it must be possible to precisely calculate what the total basic annual number of hours is in relation to the full year.