National Minimum Wage and 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 will continue to apply.
"Employers need to ensure that they are paying their employees the correct rates of pay in all instances. This page contains guidance and key points to remember. We encourage anyone unsure about minimum pay rates to try our online tool which can help identify any potential problems."
Stewart Gee, Head of Information and Guidance, Acas
Who will be entitled to the National Living Wage?
Generally all those who are covered by the National Minimum Wage, and are 25 years old and over, will be covered by the National Living Wage these include:
- most workers and agency workers
- casual labourers
- agricultural workers
- apprentices who are aged 25 and over and who have completed their first year of apprenticeship.
Penalties for failure to comply
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 National Living wage was introduced for working people age 25 and over on the 1 April 2016, however it only affects someone's pay from the first full pay reference period after that date.
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.
The Low Pay Commission
The Low Pay Commission which currently recommends the level of the minimum wage will recommend any future rises to the National Living Wage rate.
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.
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.
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. Any changes to the rate are normally introduced in October each year. Information is also available on this page for the National Living Wage which come into force in April 2016.
- Most workers over school leave age will be entitled to receive the NMW.
- The NMW rate is reviewed annually by the Low Pay Commission.
- The minimum rate depends on the age of the worker.
- HM Revenue & Customs (HRMC) can take employers to court for not paying the NMW.
- There are a number of exemptions to those who receive the NMW. 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.
- The NMW rates for those aged under 25 change on 1 October every year whilst the NLW rate for those aged 25 and over will change every year on 1 April.
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.
It is important to note that these rates, which come into force 1 October 2015, apply to pay reference periods beginning on or after that date.
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 starting April 2017.
Minimum Wage and National Living Wage - an overview
There are a number of people who are not entitled to the NMW.
- 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 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.
Working Time Directive - Mobile workers - September 2015
The European Court of Justice in a recent 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 is assessing the impact of this 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.
Minimum wage calculator
Find out what you are entitled to receive using Helpline Online. Check my NMW rate now.
If you have further questions about the National Minimum Wage or National Living Wage or would like to discuss your alternatives when not being paid the right amount call the Acas helpline on 0300 123 1100.
2015 National Minimum Wage increase video
Acas Adviser, Joe Tivy, provides key information about the 2015 National Minimum Wage rate increase on 1 October 2015.