As you may be aware with effect from 1st April 2017, the rate for both the National Minimum Wage and the National Living Wage will increase.  Take a couple of minutes now to read the following article to understand your obligations and the implications of getting it wrong.

What is the National Minimum Wage?

The National Minimum Wage (NMW) is the minimum hourly rate of pay most workers are entitled to by law and consists of several bandings. The actual rate payable is dependent on the individual’s age and also whether or not they are an apprentice.

What is the National Living Wage?

The National Living Wage (NLW) is the minimum hourly rate of pay that all workers aged 25 and over are entitled to receive.

Which categories of workers are exempted from the NMW and NLW?

The following categories of workers are not entitled to receive either the NML or NLW:

  • Self-employed people
  • Volunteers or voluntary workers
  • Company Directors
  • Family members or people who live in the family home of the employer who undertake household tasks  

Who is entitled to be paid at least the NMW and NLW?

All other workers. This includes:

  • pieceworkers
  • home workers
  • agency workers
  • commission workers
  • part-time workers
  • casual workers

What should I be paying at present (up to 1 April 2017)?

Those workers entitled to be paid at least the NMW and/or NLW should get the following hourly pay rates up to 1 April 2017:

Age groups

Rates per hour

16 – 17 years old

£4.00 per hour

18 – 20 years old

£5.55 per hour

21 – 24 years old

£6.95 per hour

25 years old and over

£7.20 per hour

What will happen on the 1st April 2017?

The rate for both the NMW and NLW will increase as follows:

Age groups

Rates per hour

16 – 17 years old

£4.05 per hour

18 – 20 years old

£5.60 per hour

21 – 24 years old

£7.05 per hour

25 years old and over

£7.50 per hour

When do I need to start paying these new rates as my pay reference period doesn’t start on the 1st April?

Pay rates will only be effected from the first full pay reference period after the 1st April 2017. So, for example, if your pay reference period starts on the 22 March – 22 April, the NMW rate would be at the current rate (prior to 1st April 2017) for the period 1st April – 21st April, and then from the 22nd April the pay rate would be at the new NMW rate. This is because this is the first full pay reference period after the 1st April 2017.

What should I be paying my Apprentice?

If your apprentice is under the age of 19 OR aged 19 or over and in their first year of the apprenticeship – they must be paid at least £3.40 per hour. However, this will increase to £3.50 per hour with effect from 1st April 2017.

If your apprentice is 19 years old or more, and has completed their first year of the apprenticeship, they will be entitled to be paid in line with the NMW.

What happens if I don’t pay my staff in line with the NMW or NLW?

All workers that do not fall within the exempt category above, must be paid the NMW or NLW regardless. If you don’t the consequences can be ghastly.

Firstly, should the matter not be resolved internally and is reported to HMRC, you will be issued with a notice to make a payment in arrears, which could be for a total of 200% of the amount owed if the arrears are not paid within 14 days.

HMRC will also issue you with a fine for not paying the NMW or NLW in the first place. The current maximum fine for non-payment is £20,000 per worker. Alternatively, a worker may choose to go directly to an employment tribunal. Should their claim be successful this will also be costly.

Should you refuse to pay the issued notice and fine, HMRC will commence legal proceedings, which will damage your reputation especially if you are included in the HMRC’s “Name and Shame” list which is posted online periodically and highlighted in the national press. 

Additionally, Company Directors who are held responsible for failing to pay workers in line with the NMW and/or NLW, can be banned from holding a directorship for up to 15 years.

Disclaimer: The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Rely Ltd accepts no responsibility for the content of any third party website to which this webpage refers.