For the first time the National Living Wage and the National Minimum Wage are increasing at the same time – 1st April 2017. Prior to this, the National Minimum Wage was normally increased in October with the National Living Wage being increased in April. Now both will be increased together. This article gives the details.
The National Living Wage
The Government’s National Living Wage was introduced on 1 April 2016 for all working people aged 25 and over, and is currently set at £7.20 per hour. In April 2017 it will go up to £7.50. The current National Minimum Wage for those under the age of 25 still applies.
The key points are:
- Most workers over school leaving age will be entitled to receive the NMW.
- The NMW/NLW rate is reviewed annually by the Low Pay Commission.
- HM Revenue & Customs (HRMC) can take employers to court for not paying the NMW/NLW.
- There are a number of exemptions to those who receive the NMW/NLW. See below. These do not relate to the size of the business, sector, job or region.
- The compulsory National Living Wage is the national rate set for people aged 25 and over.
Rates of Pay for the Minimum and Living Wages
.The rates from 1 October 2016 were:
- £7.20 per hour – 25 yrs old and over (Living Wage)
- £6.95 per hour – 21-24 yrs old
- £5.55 per hour 18-20 yrs old
- £4 per hour – 16-17 yrs old
- £3.40 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
The new rates from 1 April 2017 are:
- £7.50 per hour – 25 yrs old and over
- £7.05 per hour – 21-24 yrs old
- £5.60 per hour – 18-20 yrs old
- £4.05 per hour – 16-17 yrs old
- £3.50 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
There are Some Exceptions
There are a number of people who are not entitled to the NMW/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.
All other workers including pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the National Minimum Wage.
Non-payment of the NMW is breaking the law
It is against the law for employers to pay workers less than the National Minimum Wage or to falsify payment records.
If an employer doesn’t pay the correct rate, a worker should talk to their employer and try to resolve the issue informally first. If this doesn’t work a worker may make a formal complaint to their employer.
A worker can make a complaint to HMRC who will investigate the complaint. If HMRC find that an employer hasn’t paid at least the National Minimum Wage, they can send a notice of arrears plus a penalty for not paying the correct rate of pay to the worker.
Penalties for failure to comply with the National Living Wage
With the introduction of the National Living Wage the penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days.
The maximum fine for non-payment will be £20,000 per worker. However, employers/directors who fail to pay will be disqualified from being a company director for up to 15 years.
The penalties for non-compliance can be severe and ignorance or accidental non-compliance rarely work as excuses.
Contact us or call us on 0121 422 0550 for help to make sure your payroll is compliant with the legislation.