National Minimum Wage
Following the changes recommended by the Low Pay Commission, the rates of National Minimum Wage (NMW) will increase with effect for pay periods starting on or after 1 April 2020. The changes are:
- the rate for 21 to 24 year olds will increase by 50p to £8.20 an hour
- the rate for 18 to 20 year olds will increase by 30p to £6.45 an hour
- the rate for 16 to 17 year olds will increase by 20p to £4.55 an hour
- the rate for apprentices will increase by 25p to £4.15 an hour.
National Living Wage
Workers aged 25 and over are entitled to the National Living Wage (NLW), which is set every April, and is due to increase for pay periods starting on or after 1 April 2020 from the current £8.21 per hour to the new rate of £8.72 per hour.
Most workers in the UK, over school leaving age, are legally entitled to be paid at least the NMW or the NLW and all employers have to pay the relevant rate if the individual is entitled to it. It makes no difference:
- if the employee is paid weekly or monthly, by cheque, in cash or in another way
- if the employee works full time, part time or any other working pattern
- if the employee works at the business premises or elsewhere
- what size the business is
- where the business is in the UK.
Common errors
Care does need to be taken in applying the NMW or the NLW rates since even those employers who are aware of the change to the rates can inadvertently break the rules. Therefore, it is worth considering some of the common errors that have previously been highlighted by HM Revenue & Customs (“HMRC”). These include:
- Paying an incorrect rate by failing to implement annual increases, missing birthdays and therefore not moving workers from one age band to another or making errors in applying the apprentice rates.
- Making deductions or payments from wages which reduce an employee’s wage below the national minimum wage or national living wage rates. Examples include deductions for uniforms and tools, and particular care needs to be taken where salary sacrifice arrangements are in place.
- Not accounting for unpaid working time, which is essentially hours worked and not paid, and examples include time helping to shut up shop or travelling time between assignments.
- Failing to classify workers correctly, for example mistakenly treating them as either volunteers or self-employed.
- Including top ups to pay that do not qualify towards the national minimum wage or national living wage rate.
If you would like any advice or assistance in connection with payroll, or alternatively would like to discuss any of the issues raised above, then please contact our Tax Director, Jenny Marks.
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