The National Minimum Wage

The National Minimum Wage (NMW) receives a review every year. There’s no commitment to increase the amount, but the hourly total does change from time to time.

If you pay any of your staff the NMW and you fail to increase their pay correctly, you could be breaking the law.

You could have your business name and address published as part of government ‘naming and shaming’ of businesses that don’t pay NMW, as well as given a hefty fine.

With that in mind, here’s everything you need to know and how to remain compliant with the changes.

What is the National Minimum Wage?

The NMW came into force in July 1998 via the National Minimum Wage Act. It defines a minimum hourly rate you should pay your employees and workers.

These rates are subject to review and change in April every year.

How much is the National Minimum Wage?

Current rates

Because the rates change, it’s important to keep on top of them. It’s worth reviewing your pay structure every April to ensure you’re not dipping below the legal requirement.

The hourly rate depends on the individual’s age, and whether or not they’re an apprentice. The minimum wage for 18 year olds is different to the minimum wage for 21 year olds, for example.

From April 2022, the National Minimum Wage rates will be as follows:

• National Living Wage (23+): £9.50 
• 21-22 Year Old Rate: £9.18
• 18-20 Year Old Rate: £6.83 
• 16-17 Year Old Rate: £4.81 
• Apprentice Rate: £4.81 
• Accommodation Offset: £8.70

The above is the basic minimum hourly wage UK workers should receive based on their age bracket.

The National Minimum Wage over the age of 25

Prior to 1 April 2021, the National Living Wage was for those aged 25 and over. The bracket was then reduced to 23 and over. The current rate for 23 and over applies to every age over 23. A 70-year-old will earn the same on the NMW as a 30-year-old.

Do I have to pay the National Minimum Wage to apprentices?

You have to pay at least the NMW, yes. But you can choose to pay more if you feel it’s appropriate.

There are additional rules when it comes to apprentices and minimum wage. When they reach a certain age, for example, the situation changes—another is when they’re no longer in the first 12 months of their apprenticeship.

How do I ensure I’m paying the NMW?

A common reason employers get caught out is they deduct the cost of uniforms and other expenses from employees’ wages. This dips staff below a National Minimum Wage Salary.

Another reason for these types of dips in pay is the failure to pay for travel time where travel is a crucial part of the individual’s job role.

Different hours of work

If your employee is paid minimum wage on an annual salary, you should determine how many basic hours they work in order to ensure they’re getting the minimum wage as take home pay. You can determine whether they’re working salaried hours if:

• Their contract states how many hours they work in return for their salary
• Their paid in equal, regular instalments
• There is no more than a month between each payment
• They don’t get paid more than once a week

What if they work part-time? The same rules apply to part-time minimum wage payments. As an example, Steve works 1,200 hours a year based on his contract. He is 22 and eligible for minimum wage at £9.18 per hour. He gets paid monthly, so each pay packet covers an average of 100 hours. Therefore, he’ll receive £918 a month. This is how you work out the minimum wage for part-time workers in the UK.

The National Minimum Wage in the UK is taken very seriously, and failure to pay it has severe consequences.

To ensure compliance it’s worth conducting a salary benchmarking review. This has the additional benefit of keeping your rates competitive.

Expert support

If you still have queries about the National Minimum Wage, download your free guide by clicking the button below or speak to a Croner expert on 0800 470 2802.