National Minimum Living Wage – what employers need to know - Palmers Solicitors

National Minimum Living Wage – what employers need to know

There is much talk in the media about the ‘national minimum wage’, a ‘living wage’ and now a compulsory ‘national living wage’. Often one term is used, when in fact referring to the other, which understandably leads to confusion.

National Minimum Wage:

The national minimum wage (NMW) is set in place by the government. It applies to all employees, with levels set according to age and is covered by strict wage legislation.

National Minimum Wage rates are currently:

  • £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.

There are a number of people who are not entitled to the NMW, including 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.

National Living Wage:

Now, however things are set to change. A compulsory National Living Wage is due to be introduced on 1st April 2016 for all working people aged 25 and over, and will be set at £7.20 per hour. The current National Minimum Wage for those under the age of 25 will continue to apply.

Generally everyone who is already covered by the NMW and is also 25 years old and over, will be covered by the National Living Wage these include:

  • employees
  • most workers and agency workers
  • casual labourers
  • agricultural workers
  • apprentices who are aged 25 and over

Living Wage:

To further confuse matters, there is the similarly titled ‘living wage.’ Whereas the new compulsory National Living Wage is an hourly rate of pay which will be updated by the government 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 may choose to pay the Living Wage on a voluntary basis.

Lara Murray, a solicitor specialising in employment law and litigation with Palmers said: “Employers need to be fully aware of the implications of failing to pay statutory wage levels.

“It is an offence to pay workers less than the National Minimum Wage or to falsify payment records. 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.

“The introduction of the National Living Wage will see some particularly tough penalties for employers who fail to comply – 200 per cent of the amount owed, unless the arrears are paid within 14 days and a maximum fine for non-payment of £20,000 per worker. Employers who fail to pay will be banned from being a company director for up to 15 years.”

For further advice on business and employment law, contact us.