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National Minimum Wage – Update

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As the summer comes to an end we are now starting to look forward into the autumnal and winter months.  Something fast approaching on the horizon for businesses is the annual increase to the national minimum wage (NMW).

The new NMW increase will come into force on 1 October 2016.  Therefore, if you currently pay your staff the NMW, you will need to read on to ensure you remain compliant.

With fines up to £20,000 per worker for underpaying the NMW and the chances of receiving an Employment Tribunal claim from the aggrieved worker, the penalties of not paying the NMW are serious.  However, according to the government around 80% of businesses are not aware of these potential penalties for not getting it right.

You should note that it is a criminal offence not to pay the NMW, you will have to repay the workers that have been underpaid and you can also be publically named and shamed.

What is the new NLW?

As you will be aware, the National Living Wage (“NLW”) came into force on 1 April 2016.  This applies to those workers who are aged 25 or over and the current rate is £7.20 per hour.  This will not change when the NMW changes on 1 October 2016.

What is the new NMW?

The new rates, which will come into force on 1 October 2016, for the NMW, are as follows:

  • The standard (adult) rate (workers aged 21-24) will rise from £6.70ph to £6.95ph
  • The development rate (for workers aged between 18 and 20) will rise from £5.30ph to £5.55ph
  • The young workers rate (workers aged under 18 but above school leaving age who are not apprentices) will rise from £3.87ph to £4.00ph.
  • The apprentice rate (for apprentices under 19, or those aged 19 or over in the first year of the apprenticeship) will rise from £3.30ph to £3.40ph.
  • From April 2017, the NMW will increase on 1 April each year, at the same time as the NLW.

How can you stay the right side of the law with the NMW?

Here is a quick checklist to help you:

  • Make sure that you pay the NMW and the NLW at the correct rate to all workers who are entitled to it.
  • Check with your payroll department to ensure that all workers are receiving the NMW or NLW or above.
  • Identify any work experience students or “interns” in your organisation and assess the type of work they are asked to perform whilst they are in your organisation.  If they are actually completing work for you, the NMW or NLW may apply.
  • Depending on the outcome of your assessment with regard to work experience and interns, you may need to re-evaluate your organisation’s strategy in relation to taking on work experience students or interns.
  • Consider keeping records compliant with the NMW and NLW.  HM Revenue & Customs can take employers to court for failing to pay the NMW or NLW.
  • Check whether you fall within any of the exemptions to the NMW or NLW.  However, note that these do not relate to the size of the business, sector, job or region.  Exemptions apply to self-employed people, volunteers, company directors and family members.

What if you need more advice?

It is important to note that for some categories of worker NMW and NLW applies with reference to a reference period rather than actual pay per hour.  If you need any help or assistance with this, please do contact me to ensure your compliance.

If you would like any further advice on any aspect of employment law, please contact a member of the team on 01332 227596 for a confidential chat.

To download this update as a brochure (and others) – click here

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