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National Minimum Wage and National Living Wage

National Minimum Wage

The National Minimum Wage (NMW) is the minimum pay per hour most workers are entitled to by law. The rate will depend on a worker's age and if they are an apprentice.

The National Living Wage

The Government's National Living Wage was introduced on 1 April 2016 for all working people aged 25 and over, and is set at £7.20 per hour. The current National Minimum Wage for those under the age of 25 still applies.

Key points

  • Most workers over school leaving age will be entitled to receive the NMW.
  • The NMW /NLW rate is reviewed annually by the Low Pay Commission.
  • HM Revenue & Customs (HRMC) can take employers to court for not paying the NMW/NLW.
  • There are a number of exemptions to those who receive the NMW/NLW. These do not relate to the size of the business, sector, job or region.
  • The compulsory National Living Wage is the national rate set for people aged 25 and over.

Rates of pay

It is important to note that these rates, which came into force 1 October 2015, apply to pay reference periods beginning on or after that date.

The rates from 1 October 2015 are:

  • £6.70 for workers 21 and over
  • £5.30 18-20 yrs
  • £3.87 for 16-17 yrs, who are above school leaving age but under 18
  • £3.30 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.

In October 2016 the new rates will be:

  • £6.95 per hour - 21-24 yrs old
  • £5.55 per hour 18 - 20 yrs old
  • £4 per hour - 16-17 yrs old
  • £3.40 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.

The rate will then change every April starting April 2017.

Minimum Wage and National Living Wage - an overview

NMW overview

The new pay rate will only affect someone's pay from the first full pay reference period after that date.

For example:

If the Pay Reference Period starts on the 19 March - 19 April- the pay between the 1 April - 18 April will be based on the NMW rates- The allocated pay from the 19 April - 19 May would be at the new NLW rate because this is the first full pay reference period after the 1 April.

The same rules apply when a monthly paid employee reaches the age of 25. For example if the employees birthday falls on the 25 May and the next pay reference period starts on 10 June, the employee is entitled to receive the NLW pay rate on the 10 June and not their birthday.

Exemptions

There are a number of people who are not entitled to the NMW/NLW.

  • Self-employed people.
  • Volunteers or voluntary workers.
  • Company directors.
  • Family members, or people who live in the family home of the employer who undertake household tasks.

All other workers including pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the NMW.

Agricultural Wages

Agricultural and horticultural workers in England employed after 1st October 2013 must be paid the appropriate NMW rate (see above).

Workers who were already employed before 1 October 2013 will still be entitled to the same terms and conditions set under their contract of employment; this may include overtime rates, agricultural wages, sick pay or dog allowance. DEFRA will continue to enforce complaints made by workers in respect of underpayments or non-compliance with terms and conditions of an Agricultural Wages Order before 1 October 2013 for up to six years after the breach occurred.

For agricultural workers in Scotland there is no change, and in Wales workers must be paid at least the Agricultural Minimum Wage, or the NMW if that's higher.

Family member exemption

For this exemption to apply, workers must either be a member of the employer's family, or live in the employers' family home.

Either the worker is a member of the employer's family and:

  • resides in the family home of the employer
  • shares in the tasks and activities of the family.

Or the worker resides in the family home of the employer, and:

  • is not a member of that family, but it treated as such (in regards to the provision of living accommodation, meals and the sharing of tasks and leisure activities)
  • is neither liable to any deductions, nor to make any payment to the employer, or any other person, as respects the provision of the living accommodation or meals.
  • if the work had been done by a member of the employer's family, it would not be treated as work.

Non-payment of the NMW

It is against the law for employers to pay workers less than the National Minimum Wage or to falsify payment records.

If an employer doesn't pay the correct rate, a worker should talk to their employer and try to resolve the issue informally first. If this doesn't work a worker may make a formal grievance to their employer.

A worker can make a complaint to HMRC who will investigate the complaint. If HMRC find that an employer hasn't paid at least the National Minimum Wage, they can send a notice of arrears plus a penalty for not paying the correct rate of pay to the worker.

Penalties for failure to comply with the National Living Wage

With the introduction of the National Living Wage the penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days.

The maximum fine for non-payment will be £20,000 per worker. However, employers who fail to pay will be banned from being a company director for up to 15 years.

The difference between the National Living Wage and the Living Wage

The new National Living Wage is different from the Living Wage, which is an hourly rate of pay and updated annually. The Living Wage is set independently by the Living Wage Foundation and is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis.

Working Time Directive - Mobile workers - September 2015

The European Court of Justice in a case gave the judgement that mobile workers who have no fixed place of work, and spend time travelling from home to the first and last customer, should have this time considered as working time. The Court add that because the workers are at the employer's disposal for the time of the journeys, they act under their employer's instructions and cannot use that time freely to pursue their own interest.

Acas will assess the impact of the judgement on workers and employers in Great Britain, including whether it has any effect on the payment of the National Minimum Wage, and will provide more detailed guidance when it is available.

Acas training - 'National Living Wage - what you need to know'

Acas have several training events on the National Living Wage. View Acas training - 'National Living Wage - what you need to know' for further information.

Minimum wage calculator

Find out what you are entitled to receive using Helpline Online. Check my NMW rate now.

Acas training - 'National Living Wage - what you need to know'