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The National Living Wage and the National Minimum Wage

Written by: Fit for Work team | Posted in: Blog

national living wageThe National Living Wage

On April 1 2016, The National Living Wage came into force. The new law means that almost all workers aged 25 or over are legally entitled to earn at least £7.20 an hour.

Apprentices who are 25 or over and have finished the first year of their apprenticeship are entitled to the National Living Wage, while a different pay scale applies to those under 25 and/or in their first year (see below).

The Low Pay Commission will review the National Living Wage every year and recommend increases to take effect in April, with the aim being for the National Living Wage to reach 60% of the country’s median wage by 2020.

The National Minimum Wage

The National Living Wage is set differently from the National Minimum Wage. These rates are also reviewed annually by the Low Pay Commission and have historically increased in October. Although from 2017, both the National Living Wage and the National Minimum Wage will increase in April each year.

The National Minimum Wage is currently as follows:

Age Minimum rate per hour
16-17 £3.87
18-20 £5.30
21-24 £6.70
Apprentices £3.30

 

From October 2016, the following rates will apply:

Age Minimum rate per hour
16-17 £4.00
18-20 £5.55
21-24 £6.95
Apprentices £3.40

 

Note that the rate for apprentices applies to those who are under 19 or in their first year. After the first year of an apprenticeship, those aged 19 and over are entitled to the National Minimum Wage for their age group. If the apprentice is 25 or over, they are entitled to the National Living Wage.

Most people who are over school leaving age are entitled to the National Minimum Wage, but the wage does not apply to those who are self-employed or work voluntarily.

The Living Wage

The Living Wage is different from the National Living Wage and the National Minimum Wage. The Living Wage is set by the Living Wage Foundation and is not a legal requirement but a voluntary payment that applies to all employees over 18. This wage differs for those who live in London and those who live outside of the capital.

The correct pay

Employers need to ensure that they are paying their workers correctly or they can be investigated by HMRC and receive a penalty. The penalty for non-payment is 200% of the amount owed, (reduced to 100% if the penalty is paid within 14 days). The maximum penalty is £20,000 per worker and employers who break the law will be publicly named and shamed.

To find out what you or your employees are entitled to, use this tool from ACAS.

Employees who think they may have been underpaid can call ACAS for advice (0300 123 1100). ACAS may also suggest employees talk to HMRC.

The Fit for Work advice hub has information on a range of other subjects to do with rights and regulations at work such as The Equality Act 2010, statutory sick pay and risk assessments.

You can also call 0800 032 6235 (English) or 0800 032 6233 (Cymraeg) to speak to a dedicated advisor. Those in Scotland can visit fitforworkscotland.scot or phone 0800 019 2211.

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