Getting minimum wage obligations right can be challenging for employers, as indicated by the findings of a recent report by the Low Pay Commission. The report found considerable levels of minimum wage underpayment. Overall, the report revealed that underpayment has been steadily increasing since the introduction of the National Living Wage in 2016. Here, we provide an overview of the minimum wage.
The minimum wage is paid at an hourly rate, with payment bands depending on age, and special provisions applying to apprentices. The National Living Wage (NLW) is the minimum wage for those aged 25 and over, whilst the National Minimum Wage (NMW) applies to those above school leaving age and individuals aged under 25. For convenience, we refer to ‘minimum wage’ to cover both the NLW and the NMW.
Minimum wage rate
Hourly rate from 1 April 2019
21-24 year-old rate £7.70
18-20 year-old rate £6.15
16-17 year-old rate £4.35
Apprentice rate £3.90
Accommodation Offset £7.55 per day: £52.85 per week
Minimum wage rates usually change each April.
To help employers check their minimum wage calculations, the government has provided a minimum wage calculator. Failure to pay the minimum wage correctly can lead to penalties.
What counts as pay?
Incentive payments and bonus payments, for example, count as pay for minimum wage purposes. Loans, advances of wages, pension payments and rewards under staff suggestion schemes do not. Neither do tips and gratuities. If someone incurs expenses in connection with their employment and is not reimbursed by the employer, then the expense reduces their pay for minimum wage purposes. Consider uniforms: where a salary sacrifice scheme is operated, employers need to look at the figure for pay after sacrifice to assess minimum wage compliance.
What counts as working time?
HMRC reports errors around failure to pay travel time, and whilst staff do not need to be paid for home-to-work travel time, there are some periods of travel time for which there is a minimum wage liability. These include travelling from one work assignment to another, or waiting to collect goods.
HMRC reports many errors in this area. To qualify as an apprentice, there must be an apprenticeship contract and an element of structured training. The apprenticeship rate applies only if an apprentice is under 19, or over 19 and in the first year of their apprenticeship.
General information for employers can be found on the gov.uk site, with more detailed guidance in HMRC’s manuals. The minimum wage is a complex area, and we have only been able to touch on key points here.
We would be only too pleased to provide any further assistance you may need.