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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 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

New NMW rates announced for April 2020

The new rates of the National Living Wage and National Minimum Wage to take effect from April 2020 have been announced. The new hourly rates will be:

  • Age 25 and above (National Living Wage) - £8.72
  • Age 21 to 24 - £8.20
  • Age 18 to 20 - £6.45
  • Over compulsory school age to 17 - £4.55
  • Apprentices under 19 or 19+ and in the first year of apprenticeship - £4.15
Sleep ins and NMW - Supreme Court to hear 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 has now granted permission to appeal this decision, with a hearing set to take place in due course. 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.
Conservatives pledge to increase National Living Wage up to £10.50

Home Secretary Sajid Javid has announced that the National Living Wage, currently the highest minimum wage rate, is to increase up to £10.50 within the next five years, which he states would give four million workers a pay-rise. Furthermore, the highest band of minimum wage available will be extended to anyone who is aged 21 and over. 

Whilst this announcement does set a target for the government, the rates for next year are yet to be announced and it is currently unclear how much rates will increase annually in the run up to this.

Minimum wage 'naming and shaming' to be reintroduced

From 6 April 2020, organisations who have been found to not pay staff at least the minimum wage are to once again be included on a quarterly list by the Department for Business, Energy and Industrial Strategy (BEIS). This comes after the scheme was paused in late 2018 to carry out a review into its effectiveness.

Subject to Parliamentary approval, from April 2020 organisations who fail to provide the minimum wage will once again be listed, however the threshold for being included on this list is to increase. Whilst previously those who owed arrears of at least £100 were noted, they instead now need to owe at least £500.

Alongside the reintroduction of this scheme, the government is updating rules surrounding the underpayment of the minimum wage to take mitigating factors into account. Organisations that offer salary sacrifice schemes will now no longer face financial penalties if pay falls below the minimum wage as a result.

Additionally, workers who are paid daily or hourly can be classed as salaried workers, with further changes expected to help organisations avoid being accidently caught out. These include:

  • allowing additional payment cycles for salaried workers
  • permitting organisations to choose the appropriate ‘calculation year’ to help them monitor hours worked by salaried workers
  • ensuring salaried workers are able to receive ‘premium pay’ without losing their entitlement to equal and regular instalments.