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National minimum wage

Overview

The national minimum wage (NMW) applies to all workers and is paid at different rates according to age. There is a separate rate for apprentices, and a National Living Wage (NLW) applies to workers aged 25 and over. The current and future rates for the minimum wage (which represents gross pay) are as follows:

Age Rate from 1 April 2019 Rate from 1 April 2020 Rate from April 2021
Workers aged 25 and over (NLW)* £8.21 an hour £8.72 an hour £8.91
Workers aged 21 and over* £7.70 an hour £8.20 an hour £8.36
Development rate for workers aged 18-20 £6.15 an hour £6.45 an hour £6.56
Young workers rate for workers aged 16-17 £4.35 an hour £4.55 an hour £4.62
Apprentices under 19, or over 19 and in the first year of the apprenticeship £3.90 an hour £4.15 an hour £4.30
 
Employers paying output workers, including home workers, piece rates (payment according to the number of items produced or tasks completed) must either pay the minimum wage for every hour worked, or a 'fair piece rate' (currently set at 120 per cent of the NMW). 

The minimum wage rates are reviewed annually and will be updated in April.

*From 2021, the NLW will be extended to cover all adults aged 23 and above. 

Key points

  • All workers, except those who are genuinely self-employed, are entitled to receive the NMW/NLW
  • Gross pay is used to calculate whether an eligible worker has been paid the minimum wage
  • The NMW/NLW is calculated by including most financial awards or payments, but excluding allowances such as regional or on-call allowances, unsocial hours payments, tips and gratuities, or any benefits in kind, with the exception of accommodation up to a specified amount
  • Employers can average the hourly rate of pay over the pay period
  • Single hourly rates that a worker is entitled to in a pay reference period applies on the first day of that period; for example, if a worker turns 25 on January 25, and their next pay reference period begins on February 1, they will receive the NLW from February 1.
  • Non-compliance can result in an enforcement notice requiring the employer to pay the difference between what was actually paid and what the worker should have received under the NMW legislation. Further non-compliance could result in the issue of a penalty notice and financial penalties.

Recent developments

New minimum wage rates announced for 2021

The government has confirmed that they will be accepting all recommendations from the Low Pay Commission. This news comes despite earlier rumors that the minimum wage would be frozen. Crucially, the National Living Wage will increase by 2.2 per cent. It will also be extended to those aged 23 and 24 for the first time, meaning those in this age bracket will see their salaries increase by nearly 9 per cent. 

Here are the new amounts below - 

National Living Wage (23+)          £8.72     £8.91 - 2.2% increase

21-22 Year Old Rate        £8.20     £8.36 - 2.0% increase

18-20 Year Old Rate        £6.45     £6.56 - 1.7% increase

16-17 Year Old Rate        £4.55     £4.62 - 1.5% increase

Apprentice Rate               £4.15     £4.30 - 3.6% increase

Accommodation Offset     £8.20     £8.36 - 2.0 increase

 

Voluntary living wage rates for 2020/21 announced

The Living Wage Foundation has announced the new rates for the Voluntary Living Wage, which organisations signed up to the Foundation will need to implement by May of next year. 

The new rate for those in London is £10.85 per hour. 

The new rate for those in the rest of the UK is £9.50 per hour. 

Sleep ins and NMW - Supreme Court heard appeal
In 2018, the Court of Appeal had decided that there is no entitlement to NMW for time spent asleep during a care worker's sleep in shift. In making this ruling, the Court declared that previous binding case law which decided, for example, that NMW applied to sleeping hours in the situation where a worker would be disciplined if they left the workplace, was wrong. Read our case report on Royal Mencap Society v Tomlinson-Blake.
 
The Supreme Court  granted permission to appeal this decision, and a hearing took place in January. This continues the ongoing uncertainty regarding pay for sleep-ins, with many organisations eager for the courts to reach a final decision in order to pay staff lawfully. The ruling is still awaited, with the delay likely attributed to the 2020 coronavirus pandemic.