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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 2017 Rate from 1 April 2018 Rate from April 2019
Workers aged 25 and over (NLW) £7.50 an hour £7.83 an hour £8.21 an hour
Workers aged 21 and over £7.05 an hour £7.38 an hour £7.70 an hour
Development rate for workers aged 18-20 £5.60 an hour £5.90 an hour £6.15 an hour
Young workers rate for workers aged 16-17 £4.05 an hour £4.20 an hour £4.35 an hour
Apprentices under 19, or over 19 and in the first year of the apprenticeship £3.50 an hour £3.70 an hour £3.90 an hour
 
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.

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
  • 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.
  • The government expects the rate to rise to over £9 by 2020 (a government policy paper explains the thinking behind the NLW).

Recent developments

New legislation announced to prevent tip deductions

Prime Minister Theresa May has announced that legislation will be introduced, at the earliest opportunity, to prevent unfair tipping practices by organisations. The aim of the legislation will be to ensure that staff are receiving all tips that relate to their service and outlawing the ability for organisations to make deductions to cover business charges, such as credit card administration fees.

Although the new law has been announced, there are no further details as to how this will apply across organisations or any expected implementation date. Tipping is a complex area in itself, and it will have to be confirmed whether the new law will apply to cash tips, gratuities paid through cards and/or service charges automatically applied to restaurant bills.

Sleep ins and NMW - Court of Appeal decision
The Court of Appeal has 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.
 
This decision now leaves questions over current Government guidance and the continuance of the Social Care Compliance Scheme. The Scheme was implemented to ensure workers received NMW for sleep ins under previous case law rulings but disapplied the usual fine that would accompany an underpayment finding. Our news article explains more about the scheme.