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National Minimum Wage (NMW) and National Living Wage (NLW)

If you are a business owner, it's important that you are paying your staff correctly. It is a legal requirement after all and you could face hefty fines if you don't comply. Likewise, if you are an employee, it is your absolute right to be paid fairly, so it is something you should be aware of too.

"no matter how small your business is, it is a legal requirement to pay your employees correctly"

What's the difference between the National Minimum Wage (NMW) and the National Living Wage (NLW)?


The NMW is the minimum pay per hour that almost all workers are entitled to. It varies depending on the employees age group and whether they're an apprentice. There are a few exceptions such as:
  • Company directors
  • Volunteers
  • Self-employed people running their own business

For the full list of exemptions please see the gov.uk website.

The NLW is higher than the NMW and workers over 25 years old are entitled to it (changing to 23 years old in April 2021).

Understanding the difference is important because no matter how small your business is, it is a legal requirement to pay your employees correctly. 

For the current tax year (20/21) the NMW is as follows:

  • £8.20 for 21-24 year olds
  • £6.45 for 18-20 year olds
  • £4.55 for Under 18s
  • £4.15 for Apprentices
The NLW for the current tax year (20/21) is £8.72.

For the coming tax year (21/22) which begins 6th April, the NMW will be as follows:

  • £8.36 for 21-22 year olds
  • £6.56 for 18-20 year olds
  • £4.62 for Under 18's 
  • £4.30 for Apprentices
The NLW for the coming tax year (21/22) will be £8.91 and will include 23 and 24 year olds for the first time ever.


You may have read in the news recently that the likes of Tesco, Pizza Hut and Superdrug have been hit with NMW enquiries resulting in them being named and shamed, plus being obliged to top up the wages of employees and ex-employees potentially going back up to 6 years, based upon current NMW rates and not the rates applicable at the time. 

Tesco’s understatement, in most cases, was less than £10 per employee. However, that still racked amounted to a whopping £5.1 million of underpayment. Penalties of up to 200% of the underpayment could be imposed on top of that. 

The Department of Business, Energy and Industrial Strategy (BEPS, who embark on these NMW enquiries, don’t just pick on the big boys but on the small businesses as well). 

Interestingly, BEPS latest target sector is Newsagents!! They are looking into what paper boys/girls are being paid and how that is calculated to see whether or not there is a NMW breach. They are conducting random interviews with a selection of these paper boys/girls.

Make sure you are paying your staff correctly. If you're not sure, why not get in touch for advice or better still, let us take on the burden of your payroll. One less thing to worry about!


 


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