The National Minimum Wage Regulations became law on the 1st April 1999 to enforce a statutory minimum wage making it illegal for employers to pay less. The Regulations apply to employers in the UK, regardless of the size of the business, subject to the exceptions listed below.
The National Living Wage was incorporated from 1st April 2016 onwards.
Below are the current rates for the year 1st October 2016 - 1st October 2017
The National Living Wage Rate
1. The National Living Wage of £7.20 per hour for workers aged 25 and over, started 1st April 2016 and changes every April.
The National Minimum Wage Rates
1. Standard minimum age of £6.95 per hour for workers aged 21-24.
2. Minimum wage level of £5.55 per hour for workers aged 18-20 inclusive. Known as the "development rate".
3. Young workers rate (for workers under 18, but above compulsory school age, who are not apprentices) £4.00 per hour.
4. Apprentice rate (for apprentices under 19 or 19 and over, but in first year of apprenticeship) £3.40 per hour.
Hourly Rates Table From 2010 - 2016
Year 21 and over 18 to 20 Under 18 Apprentice
2015 £6.70 £5.30 £3.87 £3.30
2014 £6.50 £5.13 £3.79 £2.73
2013 £6.31 £5.03 £3.72 £2.68
2012 £6.19 £4.98 £3.68 £2.65
2011 £6.08 £4.98 £3.68 £2.60
2010 £5.93 £4.92 £3.64 £2.50
Fair Piece Rates
For piece work the employer must find out how many pieces or tasks an average worker can complete in an hour. The "fair" piece rate is 1.2 times the rate which lets a worker of average speed earn the National Minimum Wage in an hour.
This allows workers whose speed may be a bit below average the chance to earn the National Minimum Wage regardless.
The employer must give written notice before the start of the first pay reference period. (If the terms of the notice change then a new notice should be provided before the start of the next pay reference period.)
The notice must explain how the employer has calculated the "fair" piece rate and must:
1. Treat workers as working for a certain period of time when doing their job of producing pieces or performing tasks.
2. Conduct a test or estimate the average speed at which their workers work when doing the same job or task.
3. State what the "mean hourly output rate" for the piece or task is (the number of pieces or tasks the average worker can complete in any given hour).
4. State the rate or sum to be paid for producing the piece or performing the task.
5. Provide the telephone number of the Pay and Work Rights Helpline: (0800 917 2368).
If the notice from the employer does not contain all of this information the worker will be entitled to the National Minimum Wage for every hour worked as a default.
Workers Covered by the Regulations
The following workers are covered by:
- Full-time workers.
- Part-time workers.
- Casual workers.
- Home workers.
- Freelance workers.
- Temporary & agency workers.
- Those of retirement age or pensioners, if they are working.
- Piece workers, who must be paid the minimum wage for every hour worked.
(Detailed information regarding Piece workers is provided in the National Minimum Wage Regulations).
Workers Not Covered
The Regulations do however allow for exceptions, the following workers are not covered:
- Members of the armed forces.
- Share fishermen.
- Volunteer workers.
- Prisoners employed during their sentence.
- The self-employed.
- Au pairs and nannies.
Employers will not be able to avoid paying less than the minimum wage by making current employees become self-employed. There are strict tests under employment law regarding who is judged self-employed and who counted as an employee.
Enforcement of the Regulations
The Regulations are enforced by HMRC.
An employer can be served with an Enforcement Notice by HMRC instructing them to comply with the law within a set time period, this includes paying all the under-payment due to their workers. The employer can also be fined an additional amount equal to 50% of the total underpayment, up to a maximum of £5,000. However, as from February 2014 this maximum fine amount will increase to £20,000.
There is also a criminal fine for the following situations:
- Refusing to comply with the Regulations.
- Failing to keep proper wage records or keeping false records.
- Obstructing an official from HMRC.
Employees can also contact the ACAS Helpline on 0300 123 1100, this is a free and confidential service funded by the government.
An employee cannot agree orally or in writing with his / her employer to be paid less than the minimum wage, this will still be an offence committed by the employer.
Third of British workers could benefit from NLW - The Guardian
Lidl to pay the actual Living Wage Foundation hourly rate - BBC News
Government proposes increases in fines for minimum wage breaches - BBC News
IKEA to pay actual living wage from April 2016 - BBC News
Government unveils "living wage" proposal - BBC News