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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 25 and over. The current and future rates for the minimum wage (which represents gross pay) are as follows:

Age Rate from 1 April 2018 Rate from 1 April 2019 Rate from 1 April 2020
Workers aged 25 and over (NLW) £7.83 an hour £8.21 an hour £8.72 an hour
Workers aged 21 and over £7.38 an hour £7.70 an hour £8.20 an hour
Development rate for workers aged 18-20 £5.90 an hour £6.15 an hour £6.45 an hour
Young workers rate for workers aged 16-17 £4.20 an hour £4.35 an hour £4.55 an hour
Apprentices under 19, or over 19 and in the first year of the apprenticeship £3.70 an hour £3.90 an hour £4.15 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
  • 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

NMW could be 'frozen in 2021

A report by the Sunday Telegraph suggests that the Government may be considering scrapping the annual increase of the National Minimum Wage (NMW) and National Living Wage (NLW) next year.

This news comes as the coronavirus’ impact on the financial stability of many organisations raises questions as to whether these organisations will be able to afford wage increases. It is likely, according to the newspaper, that Chancellor Rishi Sunak will be making the announcement in the upcoming Budget this Autumn. 

Please refer to our article for more information. 

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.