The National Minimum Wage and the National Living Wage will increase from 01 April 2021.
What is the National Minimum Wage (NMW) & National Living Wage (MLV)?
You may have heard of the National Minimum Wage and wonder how this differs to the National Living Wage.
The terms are often interchangeable, however the correct definitions are as follows:
The National Living Wage is applicable to those aged 23 and over (from April 2021).It is simply a renaming of the National Minimum Wage and is not truly linked to the costs of living
The National Minimum Wage is the minimum amount payable to all of the other workers. As a result, the rates for those aged 22 and under from April 2021 are all National Minimum Wage rates.
National Minimum Wage rates are as follows
| Age Band | From 1st April 2021 |
| Adult Rate 23 + | £8.91 |
| Adult Rate 21-22 | £8.36 |
| 18-20 | £6.56 |
| Under 18 | £4.62 |
| Apprentice Rate 1 * | £4.30 |
Previous Rate Bands
| Age Band | From 1st April 2020 to 31st March 2021 |
| Adult Rate 25 + | £8.72 |
| Adult Rate 21-22 | £8.20 |
| 18-20 | £6.45 |
| Under 18 | £4.55 |
| Apprentice Rate 1* | £4.15 |
*The apprenticeship rate is applicable for those on an apprenticeship aged under 19 years of age or if they are in their first year of the apprenticeship.
One of the common mistakes made by employers is to miss checking whether salaried members of staff are meeting the minimum wage criteria as well:
Here is a table that will help you check that you are meeting your obligations:
| Contracted hours | Annual Salary | ||||
| 23 and Over | 21 to 22 | 18-20 | under 18 | Apprentice | |
| Rate £ | £8.91 | £8.36 | £6.56 | £4.62 | £4.30 |
| 40.0 | 18,533 | 17,389 | 13,645 | 9,610 | 8,944 |
| 37.5 | 17,375 | 16,302 | 12,792 | 9,009 | 8,385 |
| 35.0 | 16,217 | 15,216 | 11,940 | 8,409 | 7,826 |
| 20.0 | 9,267 | 8,695 | 6,823 | 4,805 | 4,472 |
| Contracted hours | Monthly Salary | ||||
| 23 and Over | 21 to 22 | 18-20 | under 18 | Apprentice | |
| Rate £ | £8.91 | £8.36 | £6.56 | £4.62 | £4.30 |
| 40.0 | 1,545 | 1,450 | 1,138 | 801 | 746 |
| 37.5 | 1,448 | 1,359 | 1,066 | 751 | 699 |
| 35.0 | 1,352 | 1,268 | 995 | 701 | 653 |
| 20.0 | 773 | 725 | 569 | 401 | 373 |
Does everyone qualify for the National Minimum Wage?
No. Not everyone is entitled to receive the National Minimum Wage.
The main individuals who are exempt are the following:
- Self-employed individuals,
- Company Directors,
- Volunteers,
- Students on work placements
- Workers younger than school leaving age (i.e. Usually 16)
TAX TIP: We strongly recommend that if you are a Company Director that while you do not have to meet National Minimum Wage legislation you do want to consider a salary level that contributory year for the purposes of the state pension.
What are the penalties for not paying the minimum hourly rates?
It is against the law to pay workers less than the UK National Living Wage or National Minimum Wage. Workers not receiving the minimum hourly rate should speak to their employer immediately.
Should the issue not be resolved, typically the worker would either go to an employment tribunal or could even ask HMRC to investigate.
If found guilty, the penalty can be anything up to £20,000 per worker. The company Director can be publicly named and banned from being a Director for up to 15 years.
National Minimum Wage – Steps to take
The hourly rate increases are clearly defined by age boundaries. As a result, it is important to ensure that the correct dates of birth for all workers are known.
Any employee aged 17, 20 and 22 years of age should have their birthdays noted as they will change to a different pay group. For example, a 22 year old will be entitled to £8.36 on 1st April 2021. However, on their 23rd birthday, this will increase to £8.91 per hour.
The National Living Wage has been extended to include 23 and 24 years from 1st April 2021. We therefore recommend all workers aged 23 and 24 are identified and checked to ensure compliance.
Most businesses now use commercial software. Ensure that all date of births are entered as some software will warn you if there is an issue.
