TM Law Solicitor Aidan Squire explains everything you need to know about the National Minimum Wage and the National Living Wage, and the key differences between the two.
As an employer you need to know the minimum wage you must pay your workers, which is set by law, at different rates depending upon their age and if they’re an apprentice.
And there are two key terms to understand – the National Minimum Wage (NNW), and the National Living Wage (NLW).
The National Minimum Wage
The National Minimum Wage is the the minimum hourly rate for most workers under the age of 25 and is an entitlement by law.
You must be at least school leaving age to get the NMW, and in England that is based on the last Friday in June of the school year in which you turn 16.
Most workers are entitled to it, including casual workers, part-time and temporary workers.
The National Living Wage
The National Living Wage is higher than the National Minimum Wage – workers are entitled to it if they’re over 25.
It was re-branded by the current government as the National Living Wage in 2016. And like the National Minimum Wage it has seen regular rises in its rates in recent years.
Minimum wage rates
The basic rates of pay are reviewed annually by the Low Pay Commission and new rates are applicable from April 1 2019:
- Aged 25 and over: £8.21 per hour
- Aged 21 to 24: £7.70 per hour
- Aged 18 to 20: £6.15 per hour
- School leaving age to 17: £4.35 per hour
- Apprentices: £3.90 per hour
Exemptions to the minimum wage rates
There are some categories of worker to who the minimum rates do not apply. These include:
- Self-employed people, volunteers or voluntary workers
- Company Directors
- Members of the Armed Forces
- Family members or people who live in the family home of the employer who undertake household tasks
- Staff on work experience depending on the length of their placement
If an employer provides accommodation to an employee, they can take the value of this into account when calculating the National Minimum Wage or National Living Wage.
But no other company benefit – for example childcare vouchers, meals, or a company car – counts towards the National Minimum Wage or National Living Wage rates.
Apprenticeship wage rates
Apprentices are treated differently under the law. The apprenticeship rate only applies if the apprentice is under 19 or 19 or over in the first year of the apprenticeship.
Apprentices over 19 who have completed the first year of their apprenticeship are entitled to the National Minimum Wage for their age.
Agricultural Workers
The NMW or NLW rate applies to agricultural and horticultural workers employed after October 1 2013.
If employed prior to that date they will still be entitled to their Contract of Employment terms and conditions, which might include things like overtime rates and sick pay.
Family members and the minimum wage
There are special rules if a worker is in the employment of a member of his family and resides in the family home of the employer, or shares in the tasks and activities in the family. They are not eligible for the minimum wage as a result.
Also, a non-family member who resides in the family home of the employer is not eligible for NMW or NLW in the following circumstances:
- If they are treated as a family member regarding accommodation, meals and the sharing of tasks and recreational activities
- If they are not liable to any deductions and do not make payment to the employer or to any other person in respect of living accommodation or meals
- If the work had been done by a member of the employer’s family, it would not have been treated a work.
Not confusing the National Living Wage and the Living Wage
The National Living Wage is different from the Living Wage. The Living Wage is set by the Living Wage Foundation and is based on the cost of living, applied to all workers above 18.
The Living Wage Foundation – a think tank that aims to improve the living standards of low and middle-income families – independently calculates a wage based on the cost of living in the UK, and this is paid by some employers on a voluntary basis.
There is a UK rate and a London rate. The UK Living Wage is £8.75 an hour and the London Living Wage is £10.20 an hour – above the legal minimums set by the government.
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