Welcome - the National Living Wage!
From 1 April, workers on the National Minimum Wage who are aged 25 and over, are entitled to a 50p per hour increase in their wage – the ‘National Living Wage’.
According to Treasury figures, millions of workers are set to benefit. Here we try to help workers understand the rules so that they are better placed to self-check their position and secure their rights.
The National Minimum Wage (NMW) guarantees that you will receive a minimum amount of pay per hour. The NMW is set by the Department for Business Innovation and Skills and monitored by HM Revenue & Customs (HMRC). From October 2015 the hourly rate, if you are aged 21-24, is £6.70; aged 18 to 20, £5.30 and aged 16 or 17, £3.87. The rate for an apprentice, who is either under 19 or 19 or over and in the first year of their apprenticeship, is £3.30.
The National Living Wage (NLW) applies from 1 April 2016 and is essentially a 50p per hour premium on top of the NMW rate of £6.70. It means workers aged 25 and over (and not in the first year of an apprenticeship) should now receive a minimum of £7.20 per hour. (If you are eligible for the new NLW, you should check your payslip after 1 April 2016 to make sure you are receiving the extra!) The NMW rates will still apply to workers under 25 and apprentices.
You are entitled to the NMW/NLW no matter whether you are a full or part-time worker, an agency worker, migrant worker, student or casual worker. You can find out more about who is entitled to the minimum wage on GOV.UK. Please note that your employer cannot pay you less than the NMW, or the NLW if you are entitled to it, even if you are willing to accept it.
It is fairly straightforward to work out if you are being paid the proper amount where you are paid on an hourly basis for a set number of hours each week or month – indeed there is a calculator to help you do this on GOV.UK. The rules are more complex where you are paid per task you perform or piece of work you do (known as ‘piece work’). You must be paid either at least the minimum rate for every hour worked or on the basis of a ‘fair rate’ for each task or piece of work you do. Read more about how to work out the NMW/NLW using this system on the GOV.UK website.
Workers entitled to the NMW/NLW must get at least the NMW/NLW in base pay, with any tips gratuities or service charges they may obtain as part of their job being paid on top. You can find out more on the GOV.UK website.
Your employer cannot make deductions from your pay in respect of items or expenses that they have provided that are necessary for your employment (such as for a uniform, tools or protective clothes), if these deductions bring down your pay rate below the NMW or NLW. You can find confirmation of this on GOV.UK.
If your employer provides you with accommodation, they can count some of its value towards NMW or NLW pay. Your employer cannot count more than the accommodation offset rate which from October 2015 is £5.35 a day or £37.45 a week. If an employer charges more than this, the difference is taken off your pay which counts towards the NMW or NLW. However, colleges and universities are exempt from this rule for full-time higher and further education students, who are provided with accommodation from the college or university and, independently of the provision of their accommodation, are employed by the college or university.
Worker A, who is 28 years old, is paid £8 an hour for 40 hours work (£320 per week). But he stays in the employer’s accommodation and the employer charges him £85 per week for his bed and board. Under the accommodation offset rules, the employer is allowed to consider £37.45 per week as pay for minimum wage purposes. So whilst Worker A actually only receives £235 (320-85), he is deemed to receive £272.45 (235+37.45). However, the deemed amount of wages is less than the NLW for his 40 hours work, as it only amounts to £6.81 an hour. ]
You can find more information on the accommodation offset rules on GOV.UK.
Where workers undergo training (for example – employment induction or skills development) the time spent on such activities is working time for minimum wage purposes where a contract of employment has started or where it is a contractual requirement for the worker to attend the training. However, where prospective workers attend pre-employment induction events to assess their suitability for employment or as part of the job application process, then this would not count and is exempt from the minimum wage rules. You can see what other things count as working time on GOV.UK.
Travel time and costs
Whilst it is not a requirement under minimum wage law for an employer to make separate payments to workers for their travel, workers should be paid at least the NMW/NLW rate for all hours worked, including travel time and out of pocket expenses such as vehicle mileage (‘travel’ means travel in connection with work but not travel from home to place of work).
Worker B is 35 and is paid weekly. Last week she was paid £7.20 for 30 hours work (£216). However the worker spent 45 minutes driving to a business meeting, so the minimum amount to be paid to the worker should be £7.20 x 30 hours, 45 minutes = £221.40. Worker B has been paid below the NLW. Her employer needs to top up her pay by at least £5.40 so that the NLW rules are met.
It is important that care workers in particular, who are often required to travel extensively to visit people in their own homes, try and understand the travel time rules to make sure they are being applied correctly. There are some useful examples looking at care workers and travel time on GOV.UK. Care workers may also be interested to read the Low Incomes Tax Reforms Group’s press release in which we describe some of the minimum wage complexities they face and call for a change in the rules.
Any intern who has a contractual relationship with his employer must be paid at least minimum wage for the hours they have worked. Having set hours, an obligation to fulfil those hours and complete tasks, and individual responsibility for work are all aspects that will be taken into consideration. If an intern is a ‘volunteer’ they will be exempt from NMW/NLW. Volunteers are people who are under no obligation to perform work or carry out instructions. They have no contract or formal arrangement and so can come and go as they please.
If you are an intern, you may find it useful to read the GOV.UK guidance on the national minimum wage for organisations who offer work experience, including placements and internships.
There are many other ways that an employer can sidestep the rules, such as paying cash-in-hand so that hours and wages go unrecorded and forcing workers to say they are self-employed. However, you should know that it is a criminal offence for employers not to pay someone the National Minimum Wage or National Living Wage, or to falsify payment records. You can read more about this on GOV.UK.
If you think you are not being paid the minimum wage you are entitled to, or you are confused about your situation, you can seek advice from the ACAS Pay and Work Rights helpline on 0800 917 2368 (Monday to Friday 8am to 8pm and Saturday 9am to 1pm) who will investigate your case and complaint in the strictest of confidence, taking action against the employer as necessary and demanding any arrears due to you.