BUSINESS
PAYING THE MINIMUM WAGE AND THE LIVING WAGE
BY HANNAH-JANE DOBBIE, REGIONAL HR MANAGER & HR CONSULTANT
BRITAIN HAS JUST HAD A PAYRISE. NOT ONLY HAS THE INCOME TAX THRESHOLD INCREASED TO £ 11,500, BUT THANKS TO AN ANNUAL GOVERNMENT REVIEW, FROM 1 APRIL 2017 THE NATIONAL MINIMUM WAGE AND THE NATIONAL LIVING WAGE HAVE INCREASED. BUT, EMPLOYERS BEWARE – THE GOVERNMENT IS CLAMPING DOWN HARD ON THOSE OF YOU WHO ARE NOT PAYING THE RIGHT WAGE, AS THEY RECEIVE REAL TIME INFORMATION FROM EMPLOYERS’ PAYROLLS.
Both the Living Wage and the Minimum Wage are legal requirements, but they are quite different.
The NMW was brought into force through the National Minimum Wage Act 1998 and was put in place to enforce minimum rates of pay. The minimum NMW hourly rate varies depending on an employee’ s age and whether or not they are an apprentice. The NMW is paid to workers over school leaving age( 18).
The National Living Wage( NLW) by contrast is only paid to workers who are aged 25 or over. The NLW differs from the NMW in that it is set by the Living Wage Foundation rather than the government and it is on the cost of living – so in London the NLW is slightly higher than in the rest of the UK.
Both are reviewed annually by the Low Pay Commission.
Previously, the NMW was reviewed every October. Now, both NMW and NLW are aligned and reviewed each April. Any increases need to be applied in the first pay period that starts on or after 1 April so you no longer have to have split weeks / months if 1 April falls in the middle of a pay period.
As of 1 April 2017 the NMW hourly rates of pay will be:
• Apprentice- £ 3.50
• Under 18- £ 4.05
• 18-20 year olds- £ 5.60
• 21- 24 years olds- £ 7.05
• 25 and over- £ 7.50
There are a couple of exemptions – but employers are urged to do their research, or seek some advice from those in the know before making assumptions as to whom is exempt from receiving either the NMW or the NLW.
If you contract somebody who is selfemployed, or they are a family member living in your home with you, then they are not entitled to the NMW or the NLW. Similarly, workers who are company directors, volunteers or below school age are not entitled, and there are also some stipulations for certain non-family members that live in the employer’ s home, such as an au pair.
The Government takes correct wage payment very seriously. This was highlighted by publicity aired earlier this year, stating that some 15,500 workers had to be back-paid around £ 1 million due to their employers failing to pay them the NMW or NLW. A total of 360 employers were recently( and publically) named and shamed – a record number and all-time high. But that may represent just the tip of the iceberg: The Office for National Statistics has calculated that 362,000 jobs did not pay the NMW in April 2016. Ignorance is no excuse and if you are found out you could, as well as facing a heavy fine, face negative publicity which in turn could affect the overall reputation of your business.
Employers are legally required to keep records to prove they have paid the NMW( most use payroll records) for a minimum of 3 years. HMRC officers have the right to carry out checks at any time, and any infringement will require immediate rectification.
The rise in NMW and NLW could make quite a difference to low income families and hopefully the additional spare cash following the rise in income tax threshold will also lend a hand. Increases in personal allowance come into effect from 6 April 2017 and is the amount you are allowed to earn before you pay income tax. In the year 2016 / 2017 the amount was £ 11,000, but it will now increase to £ 11,500. At the recent Budget announcement, the Chancellor, Philip Hammond, pledged that the Government is still on track to raise this even further to £ 12,500 by the end of the current parliament in 2020.
You can find out more at www. gov. uk / national-minimum-wage or you can contact your local Wilkins Kennedy payroll representative at one of our Kent-based offices in Ashford, Canterbury, Maidstone, Orpington and Sandwich.
www. wilkinskennedy. com
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