If you pay any of your staff the National Minimum Wage (NMW), you will need to be aware of upcoming changes to the rates.
The NMW is the minimum hourly pay you can legally give to your workers and this will shortly be revised by The National Minimum Wage (NMW) (Amendment) Regulations 2016 that come into force on 1 April 2016.
Currently, there are four rates of the NMW for different categories of workers. These are as follows:
- Age 21+ - £6.70
- 18-20 - £5.30
- 16-17 - £3.87
- Apprentices - £3.30
However, the above Regulations will alter some of the age ranges for the current rates and also introduce a new rate for over 25s, to be known as the ‘National Living Wage’.
As a result, the new minimum wages that will apply from 1 April 2016 will be:
- Age 25+ £7.20ph (the National Living Wage)
- 21-25 - £6.70ph
- 18-20 - £5.30ph
- <18 - £3.87ph
- Apprentices - £3.30ph
As you can see, the rate for the NMW will still depend on a worker's age and if they are an apprentice. Most workers over school age will be entitled to the NMW.
Whilst the NMW is reviewed annually by the Low Pay Commission, any changes to the rate are normally introduced in October each year. This year is unusual in that all of the changes will take place as of 1st April 2016.
From 2017, the NMW rates for those aged under 25 will change on 1 October every year, whilst the NLW rate for those aged 25 and over will change every year on 1 April.
When you don’t need to pay the National Minimum Wage
It is very important that you pay the NMW when your staff are entitled to it, as HM Revenue & Customs (HRMC) can take employers to court for not paying it.
You cannot avoid paying the NMW based on your business size, sector or location, however there are a number of exemptions that may relate to some of your workers.
People who are not entitled to the NMW are:
- Self-employed people,
- Volunteers or voluntary workers,
- Company directors and
- 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 NMW.
Family member exemption
For this exemption to apply, workers must either be a member of the employer's family, or live in the employers' family home.
Either the worker is a member of the employer's family and:
- Resides in the family home of the employer.
- Shares in the tasks and activities of the family.
Or the worker resides in the family home of the employer, and:
- Is not a member of that family, but it treated as such (in regards to the provision of living accommodation, meals and the sharing of tasks and leisure activities)
- Is neither liable to any deductions, nor to make any payment to the employer, or any other person, as respects the provision of the living accommodation or meals.
- If the work had been done by a member of the employer's family, it would not be treated as work.
What can happen if you don’t pay the National Minimum Wage?
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 grievance 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.
As such, you should always make sure that you pay the correct rate of NMW and consult an employment lawyer if you are at all unclear as to what that is.
Update: The myhrtoolkit weekly management reports now flag up when any of your employees are about to turn 25 – a handy reminder now the National Living Wage has become compulsory.
Written by Nicola Roe
Nicola Roe is an Employment Law Solicitor at Ironmonger Curtis LLP, a corporate law firm founded by Trevor Ironmonger and Jon Curtis in 2005.