National Minimum Wage – Know the Facts

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It’s fair to say that probably every employer (and employee) has heard of the National Minimum Wage and, more recently, the National Living Wage.

But did you know that not paying the National Minimum Wage is a criminal offence?

And do you understand the difference between the National Minimum Wage and the National Living Wage?

The National Minimum Wage will increase from 1 October 2015 to £6.70 per hour for employees aged 21 and over, and the National Living Wage will come into force from April 2016. This post sets out some key facts about both.

Facts about the National Minimum Wage

  • The National Minimum Wage is the minimum pay per hour that all workers (apart from some very limited exceptions) are entitled to by law.
  • It was first introduced in April 1999, when it was just £3.60 per hour.  At the time, it was believed that more than 1.9 million people were being paid at a lower rate.
  • The National Minimum Wage rate is reviewed each year and is usually updated in October.
  • The National Minimum Wage rate varies depending on the age of the employee. From 1 October 2015 the following rates will apply:
    • 21 and over: £6.70 per hour
    • 18 to 20 year olds: £5.30 per hour
    • under 18: £3.87 per hour
    • apprentices: £3.30 per hour (This rate is for apprentices aged 16 to 18 and those aged 19+ who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.)
  • Accommodation provided by an employer can be taken into account when calculating the minimum wage. However, it’s not as simple as just adding the cost of accommodation to the worker’s pay. There are various rules relating to how much you can charge for accommodation, and if an employer charges more than this, the difference is taken off the worker’s pay which counts for the minimum wage. This means the higher the accommodation charge, the lower a worker’s pay is when calculating the minimum wage.
  • Employers who discover they’ve paid a worker below the minimum wage must pay any arrears immediately, as well as increasing the worker’s pay to meet the minimum wage.
  • HMRC officers have the right to carry out checks at any time and to ask to see payment records. They can also investigate employers, following a worker’s complaint to them. If HMRC finds that an employer hasn’t been paying the correct rates, any arrears have to be paid back immediately. There will also be a financial penalty and employers can be publically named and shamed by the government.
  • Employers are responsible for keeping records for three years, to prove that they are paying the minimum wage. Typically this will be your payroll records.

What is the National Living Wage?

A new, compulsory living wage is being introduced from April 2016. It will be paid to workers aged 25 and above. Initially, it will be set at £7.20 an hour, with a target of it reaching more than £9 an hour by 2020.

How is the National Living Wage different to the National Minimum Wage?

The National Living Wage applies only workers who are over 25 years old. Workers who are aged below 25 will not be eligible for the National Living Wage but will continue to be entitled to the National Minimum Wage, at the appropriate rate for their age.

 

Looking for further advice and guidance?  Contact Claire Carr – claire@peopleandproject.com   or +44 (0) 7929 021850.

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