The National Living Wage and the National Minimum Wage
Ensure that you are compliant with all the rates.
All employers need to be aware of their responsibilities regarding compliance with the National Living Wage and the National Minimum Wage.
Anybody working, aged 25 or over and not in the first year of an apprenticeship, is legally entitled to the National Living Wage (NLW).
Despite its name, this new rate is essentially a Minimum wage for over 24s. The Government is committed to increasing this every year.
The NLW rate changes every April, while the National Minimum Wage (NMW) rates have traditionally been revised in October. However, since April 2017 the NMW and NLW cycles have been aligned so that both rates are amended in April each year.
Employers will need to make sure they are paying their staff correctly, as the NLW will be enforced as strongly as the NMW.
The table below shows the NMW and NLW rates applying from 1 April 2020:
|Previous Rate||Current Rate||Increase|
|16-17 year old rate||£4.35||£3.55||4.6%|
|18-20 year old rate||£6.15||£6.45||4.9%|
|21-24 year old rate||£7.70||£8.20||6.5%|
|National Living Wage||£8.21||£8.72||6.2%|
*Under 19, or 19 and over in the first year of their apprenticeship.
Please note, there are separate minimum rates of pay for agricultural workers. Visit: GOV.UK for more information.
Frequently asked questions
There are six criminal offences relating to the NMW:
- refusal or wilful neglect to pay the NMW;
- failing to keep or preserve NMW records;
- causing or allowing a false entry to be made in NMW records;
- producing or furnishing false records or information;
- intentionally delaying or obstructing a compliance officer;
- refusing or neglecting to answer questions, give information or produce documents to a compliance officer.
The fine on conviction for each offence is up to £20,000 where tried in the magistrates' court (or the Scottish equivalent). The most serious criminal cases are triable in the Crown Court (or Scottish equivalent). This means that employers who deliberately fail to pay the NMW may face a potentially unlimited fine.
The main means of enforcing the NMW are through:
- compliance officers of HM Revenue & Customs (HMRC);
- agricultural wages inspectors for the NMW in the agricultural sector (and the agricultural minimum wage);
- claims by workers before tribunals and courts.
HMRC compliance officers will act in response to complaints that an employer is not paying the NMW - whether the complaint is by workers or others. They will also investigate where there may be a risk of non-payment. Since 6 April 2009, HMRC has been able to use the search and seize powers in the Police and Criminal Evidence Act 1984 when investigating criminal offences under the National Minimum Wage Act 1998.
Officers may carry out inspections of employers at any time. There is no requirement to provide reasons for an inspection. They must show an identity document on request and have considerable powers to obtain information.
Notice of underpayment
If a compliance officer believes that an employer has failed to pay at least the NMW to a worker, the officer may serve a notice of underpayment, requiring the employer to:
- repay arrears of the NMW to each worker named on the notice;
- pay a penalty to the Secretary of State totalling 200% of the total underpayment for all the workers shown on the notice as underpaid for pay reference periods starting on or after 6 April 2009, with a minimum penalty of £100 and a maximum penalty of £20,000 per worker;
- The penalty will be reduced by 50 per cent if the employer fully complies with all the terms of the notice of underpayment within 14 days of service of the notice.
The employer may appeal against the notice of underpayment within 28 days of service of the notice. An appeal must be made to the employment tribunal (or industrial tribunal in Northern Ireland). If the employer does not comply with the notice of underpayment, HMRC can take a case to a tribunal or County Court (or Scottish equivalent) on behalf of the worker, or prosecute the employer.
Employers who deliberately pay their staff less than the NMW may have their breaches publicised by the Department for Business, Energy and Industrial Strategy.
HMRC has created a Dynamic Response Team which will concentrate on the most complex and high profile cases.