The National Living Wage (NMW)
The Government's National Living Wage was introduced on 1 April 2016 for all working people aged 25 and over, and is set at £7.20 per hour. The current National Minimum Wage for those under the age of 25 will continue to apply.
Generally all those who are covered by the NMW, and are 25 years old and over, will be covered by the National Living Wage these include:
- most workers and agency workers
- casual labourers
- agricultural workers
- apprentices who are aged 25 and over and who have completed their first year of apprenticeship.
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.
The difference between the National Living Wage and the Living Wage
The new National Living Wage 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.
- Most workers over school leave age will be entitled to receive the NMW.
- The NMW rate is reviewed annually by the Low Pay Commission.
- The minimum rate depends on the age of the worker.
- HM Revenue & Customs (HRMC) can take employers to court for not paying the NMW.
- There are a number of exemptions to those who receive the NMW. These do not relate to the size of the business, sector, job or region.
- The compulsory National Living Wage is the national rate set for people aged 25 and over.
- The NMW rates for those aged under 25 change on 1 October every year whilst the NLW rate for those aged 25 and over will change every year on 1 April.
The rates from 1 October 2015 are:
In October 2016 the new rates will be:
£6.70 for workers 21 and over
£6.95 per hour - 21-24 yrs old
£5.30 18-20 yrs
£5.55 per hour 18 - 20 yrs old
£3.87 for 16-17 yrs, who are above school leaving age but under 18
£4.00 per hour - 16-17 yrs old
£3.30 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
£3.40 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
The rate will then change starting April 2017.
Minimum Wage and National Living Wage - an overview
There are a number of people who are not entitled to the NMW.
- 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.