National Minimum Wage (NMW)
As you may be aware, National Minimum Wage changes in October every year. As released in the annual budget, the National Minimum Wage rates that apply from 1 October 2015 are as follows:
2015 – 2016 rates:
- adult rate: £6.70 an hour (previously £6.50 per hour)
- youth rate for those aged 18-20: £5.30 per hour (previously £5.13 per hour)
- rate for those aged 16-17: £3.87 per hour (previously £3.79 per hour)
- apprentice rate: £3.30 per hour (previously £2.73 per hour)
- accommodation offset: £5.35 per day (previously £5.08 per day).
- The apprentice rate applies to employed apprentices who are under age 19 or who are aged 19 or above in the first 12 months of their apprenticeship, for all hours spent working and training; other apprentices must be paid the relevant higher rate. Non-employed apprentices continue to be exempt from the NMW.
- Tips, service charges, gratuities and cover charges, whether discretionary or mandatory, do not count towards the NMW.
The UK Living Wage (defined as the amount people need “to enjoy a basic, but socially acceptable standard of living”) is £7.85 (£9.15 for London).
The Government has announced the introduction of a new National Living Wage (NLW) for all workers aged 25 and over. This will take effect in April 2016, and will start at £7.20 per hour. The additional cost to employers will be offset by an increase of 50% in the Employment Allowance in April 2016. Corporation tax will also be cut to 19% in 2017 and 18% in 2020.
Employers with staff on the NMW, or close to it, will need to budget for two pay increases in a twelve-month period, the first on 1 October 2015, and then again in April 2016 for employees aged 25 or over. Whilst it will be cheaper (and therefore may seem more attractive) to recruit employees aged under 25, care should be taken to avoid unlawful age discrimination.
The Government is also planning to tighten up even further on its enforcement measures. These include:
- doubling the penalties for non-payment of the National Minimum Wage and the National Living Wage – penalties will be calculated on the basis of 200% of arrears (rather than 100%). This will be halved if employers pay within 14 days. The overall maximum penalty of £20,000 per worker remains unchanged.
- increasing the enforcement budget
- setting up a new team in HMRC to deal with criminal prosecutions in the most serious cases
- introducing a new penalty of disqualification from being a company director for up to 15 years for non-payment of the NMW and the NLW.
For further information, contact our payroll team on 02089039538