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National minimum wage

Overview
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 23 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 1 April 2021
Workers aged 25 and over (NLW)* £8.21 an hour £8.72 an hour -
Workers aged 23 and over (NLW)* - - £8.91
Workers aged 21 and over* £7.70 an hour £8.20 an hour -
Workers aged 21-22* - - £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 1 April 2021, the NLW was 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 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 has increased by 2.2 per cent. It has also been extended to those aged 23 and 24 for the first time, meaning those in this age bracket have seen 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

 

Sleep ins and NMW - Supreme Court dismisses 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 2020. The Judgement came out on 19 March 2021, where the Court dismissed the appeal, agreeing with the previous decision of the Court of Appeal. This case cannot be appealed again. 
Review ordered into domestic worker exemption

In March 2021, the government has ordered the Low Pay Commission to review whether domestic workers should continue to be exempt from the national minimum wage. This is due to a recent tribunal ruling which found that women were more likely than men to be employed as live-in domestic workers and therefore see this disadvantage. 

The Commission will report its findings back to the government when completed. It is currently unknown what action will be taken in response to this. 

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 2021.  

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. 

New law on tipping to be introduced

Following promises in the conservative party manifesto, and comments by ministers that that a law will be introduced as far back as 2016, it was finally announced, on 24 September 2021, that there will be changes to the way tips are handled by employers. These include:

  • A law requiring employers to pass on tips to employees, without deductions. 
  • A statutory code of practice produced following consultation with interested parties. 
  • A requirement for employers to have a written policy on tips 
  • A right to request information on an employers tipping record. 

 

 

£9.42 NLW in April 2022?

It has been reported that the Prime Minister will increase the National Living Wage rate to £9.42 from April 2022. This has not been confirmed yet so organisations should wait for official confirmation before acting on this information.