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The Rising Cost of Staff Pay
Question:
I have a small team and have heard that the National Living Wage is due to go up in April 2017 – could you please tell me by how much?
Answer:
The National Minimum Wage (NMW) is the minimum pay per hour most workers are entitled to by law. The rate will depend on a worker’s age and if they are an apprentice.
The Government’s National Living Wage (NLW) was introduced on 1 April 2016 for all working people aged 25 and over, and is currently set at £7.50 per hour. The current National Minimum Wage for those under the age of 25 still applies.
The new NLW is different from the Living Wage, which is an hourly rate of pay and updated annually. The Living Wage is set independently by the Living Wage Foundation and is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis.
The NLW will increase from £7.20 to £7.50 per hour from the 1st April 2017. For each member of staff working full time, this increase could cost an employer on average of over £500 per year. Workers aged 25 or over and who are not in the first year of an apprenticeship, are legally entitled to the National Living Wage.
The National Minimum Wage rates (which were last increased in October 2016) from the 1st April 2017 will increase as stated below.
- Aged 21 to 24 – an increase from £6.95 to £7.05 per hour
Aged 18 to 20 – an increase from £5.55 to £5.60 per hour
Aged 16 to 17 – an increase from £4.00 to £4.05 per hour
Apprentices – an increase from £3.40 to £3.50 per hour
There are a number of people who are not entitled to the NMW/NLW.
- Self-employed people
- Volunteers or voluntary workers
- Company directors
- Family members, or people who live in the family home of the employer who undertake household tasks
All other workers including home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the NMW.
It is against the law for employers to pay workers less than the National Minimum Wage or to falsify payment records. If an employer doesn’t pay the correct rate, a worker should talk to their employer and try to resolve the issue informally first. If this doesn’t work a worker may make a formal grievance to their employer. A worker can make a complaint to HMRC who will investigate the complaint. If HMRC find that an employer hasn’t paid at least the National Minimum Wage, they can send a notice of arrears plus a penalty for not paying the correct rate of pay to the worker.
With the introduction of the National Living Wage the penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment will be £20,000 per worker. However, employers who fail to pay will be banned from being a company director for up to 15 years.