The National Living Wage and Minimum Wage - what's the difference?
The new National Living Wage is different from the Living Wage, which is an hourly rate of pay and updated annually. The Living Wage is set independently by the Living Wage Foundation and is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis.
The Government's NLW introduced on 1 April 2016 for all working people aged 25 and over is currently set at £7.20 per hour.
In April 2017 it will go up to £7.50. The current NMW for those under the age of 25 still applies.
Most workers over school leaving age will be entitled to receive the NMW.The NMW /NLW rate is reviewed annually by the Low Pay Commission.HM Revenue & Customs (HRMC) can take employers to court for not paying the NMW/NLW.
There are a number of exemptions to those who receive the NMW/NLW. These do not relate to the size of the business, sector, job or region.
The compulsory National Living Wage is the national rate set for people aged 25 and over.
Rates of pay
It is important to note that these rates, which came into force 1 October 2016, apply to pay reference periods beginning on or after that date.
The rates from 1 October 2016 are:
£7.20 per hour - 25 yrs old and over
£6.95 per hour - 21-24 yrs old
£5.55 per hour 18-20 yrs old
£4 per hour - 16-17 yrs old
£3.40 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
The rate will then change every April starting April 2017. The rates from 1 April 2017 will be:
£7.50 per hour - 25 yrs old and over
£7.05 per hour - 21-24 yrs old
£5.60 per hour - 18-20 yrs old
£4.05 per hour - 16-17 yrs old
£3.50 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
The new pay rate will only affect someone's pay from the first full pay reference period after that date.
For example, if the Pay Reference Period starts on the 19 March - 19 April- the pay between the 1 April - 18 April will be based on the NMW rates.
The allocated pay from the 19 April - 19 May would be at the new NLW rate because this is the first full pay reference period after the 1 April.
The same rules apply when a monthly paid employee reaches the age of 25. For example if the employees birthday falls on the 25 May and the next pay reference period starts on 10 June, the employee is entitled to receive the NLW pay rate on the 10 June and not their birthday.
There are a number of people who are not entitled to the NMW/NLW.
Self-employed people.Volunteers or voluntary workers.Company directors.Family members, or people who live in the family home of the employer who undertake household tasks.
All other workers including pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the NMW.
Non-payment of the NMW
It is against the law for employers to pay workers less than the National Minimum Wage or to falsify payment records.
If an employer doesn't pay the correct rate, a worker should talk to their employer and try to resolve the issue informally first. If this doesn't work a worker may make a formal grievance to their employer.
A worker can make a complaint to HMRC who will investigate the complaint and penalties will apply for failure to comply with the National Living Wage up to £20,000 per worker.
Employers who fail to pay will be banned from being a company director for up to 15 years.
Working Time Directive - The European Court of Justice in a case gave the judgement that mobile workers (such as care workers) who have no fixed place of work, and spend time travelling from home to the first and last customer, should have this time considered as working time.
The Court add that because the workers are at the employer's disposal for the time of the journeys, they act under their employer's instructions and cannot use that time freely to pursue their own interest.
Posted on Wednesday Jan 18