Get back in charge of your business wages with the BOSS HR guide to the new UK minimum wage – covering everything from the new wage rates to salary sacrifice agreements…
What is the national living wage?
The national living wage of £7.20 per hour must be paid to all workers aged 25 or over from 1 April 2016.
This is a new rate of the UK national minimum wage.
UK minimum wage rates (per hour):
– Those aged 21-24 – £6.70
– Those aged 18-20 – £5.30
– Those aged under 18 – £3.87
– Apprenticeship rate – £3.30 (for apprentices under 19 or in the 1st year of their apprenticeship). After 1st year they go onto the national minimum wage correct for their age
Who qualifies for the national living wage?
Workers who are already 25 or anyone who turns 25 after 1 April 2016. When a worker has their 25th birthday, the next time their pay reference period starts they will be entitled to £7.20.
All workers qualify for the national living wage including temporary workers, casual workers, agency workers.
When is the national living wage applied?
The new rate of pay applies to pay reference periods which start from 1 April 2016 onwards.
A pay reference period describes the way in which a worker is paid (i.e. one week if the worker is paid weekly or one month if the worker is paid monthly) and is never beyond a month.
If a pay period runs from 22nd to 21st of the month, then the national living wage will apply from 22nd April 2016.
What are the costs to businesses?
A XpertHR survey (January 2016) found the likely cost of the national living wage will be in the region of £600 per full-time employee over the next year.
How do you figure out if you are paying the correct payments?
Look at the total amount of work and pay in reference period and figure out the average hourly rate of pay over the course of that.
What pay counts for the purposes of calculating whether or not the national minimum wage has been paid?
The pay that counts towards the national minimum wage is the remuneration that the employee has received in that particular reference period. This is the workers gross pay, including any bonus, commission or other incentive pay received.
Look at the amount of cash employee gets as a result of working.
What pay does not count towards the national living wage
Benefits in kind (e.g. free luncheon vouchers, parking, childcare vouchers), tips, gratuities and service changes, allowances / overtime premiums, shift premiums, repayment of expenses, loans by the employer, advances of wages, employer pension payments.
Salary sacrifice arrangements
Salary sacrifice arrangements must not take employee’s pay below the national living wage (i.e. following the sacrifice the employee’s pay must be above the national living wage). All sacrifices need to be taken into account (e.g. childcare vouchers, pension contributions).
What counts as working time
– Traveling time between residence and place of work counts as working time
– Travel during working day from one assignment to another is accounted for in terms of national living wage
– Standby at workplace
– Overnight shifts
What does not count as working time
– Rest breaks (they may count in limited circumstances)
– Standby at home
Paying the correct rate of national minimum wage for an employee’s age is not unlawful discrimination (this is an exception).
Employers should not discriminate against a job applicant aged 25 or over because they are more expensive to employ than a job applicant under the age of 25.
It will be unlawful age discrimination to select employees from a redundancy pool on the basis that they are more expensive workers.
It is automatically unfair to dismiss or select someone for redundancy if they qualify for the minimum wage.
Penalties for employers not paying the national living wage
The Government has increased financial penalty to 200% (up from 100%) of shortfall of wages, capped at £20,000 per worker.
Enforcement officers can take action in employment tribunal if not complied with.
Press releases naming and shaming employers that have been issued with a notice of underpayment.
Individual claims for unlawful deductions of wages to employment tribunals.
The future of the national living wage
In October 2016 Low Pay Commission will make recommendations on the rates of the national living wage for April 2017.
The Government would like the national living wage to reach 60% of median earnings which would be around £9 per hour by 2020. It would have to increase by 45p each year (roughly 6% increase).