National Minimum Wage

The UK government sets The National Minimum Wage (NMW) and National Living Wage (NLW) policies to certify all workers are paid a fair wage for work undertaken. The NMW Act was first implemented in April 1999 and relates to most workers of school leaving age and under the age of 23, the NLW introduced in April 2016 is applicable to those aged 23 and over. Economic conditions and the cost of living are reviewed by the government annually to determine these minimum required rates of pay to workers.

Rates as detailed below:

New rates must be applied in the next pay period that begins on or after the date of either the rate increase or an employee reaching a new age bracket. Any employment contract detailing below these rates is not legally binding.

It must be noted that it is important an employer takes into consideration other factors which may result in workers being paid below the required rate of pay. This could come as a result of deductions essential for employment (such as equipment or work wear), time spent opening/closing premises or training which has not been accounted for. Benefits in kind for instance, meals, fuel or medical insurance cannot count towards the minimum rate of pay. The only exception is a set amount for accommodation provided by an employer; the accommodation offset rate from April 23 is £63.70 per week (£9.10 per day).

There are some deductions which do not reduce the minimum rate including: penalties for misconduct, paying back an advance in wages or payments a worker chooses to make to employers for goods or services (e.g. meals in staff canteen).

Failure to comply with these rates and/or negligence in record keeping can result in financial penalties, up to 200% of arrears owed, issued by HMRC. Further to this, reputational damage can be caused by being publicly named by the government for underpaying workers.

To conclude, the NMW and NLW policies are the legal minimum requirement set by the UK government to ensure no worker is left behind in terms of earning power and earning a fair wage. Many workers will be expectant and entitled to higher rates of pay based on various factors including, but not limited to, education, experience, responsibilities, and performance. However, this is at the discretion of the employer.

You can find out more about the NMW and NLW on the below links –

https://www.acas.org.uk/national-minimum-wage-entitlement

https://www.gov.uk/national-minimum-wage-rates

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

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