< Go Back National living wage - Is your business ready for 1 April 2020? Posted: Feb 17, 2020 From 1 April
2020, nearly three million workers are set to benefit from increases to the
National Living Wage (NLW) and minimum wage rates for younger workers,
according to estimates from the independent Low Pay Commission.
From 1 April
2020, the NLW will rise from £8.21 per hour to £8.72 per hour.
The new rates
should mean a pay rise of some £930 over the course of the year for a full-time
worker on the NLW. Younger workers who receive the National Minimum Wage (NMW)
will also see their pay boosted with increases of between 4.6% and 6.5%,
dependant on their age, with 21-24 year olds seeing a 6.5% increase from £7.70
to £8.20 an hour.
Employers need
to make sure they are ready for the new rates.
The compulsory
NLW is the national rate set for people aged 25 and over. The NLW is enforced
by HMRC alongside the national minimum wage which they have enforced since its
introduction in 1999.
Generally, all
those who are covered by the NMW, and are 25 years old and over, will be
covered by the NLW. These include:
employees most
workers and agency workers casual
labourers agricultural
workers apprentices
who are aged 25 and over The NMW is the
minimum pay per hour that most workers are entitled to receive by law. The rate
to which they are entitled depends on a worker's age and whether they are an
apprentice.
The rates from
1 April 2020, the NMW will rise across all age groups, including increases:
from
£8.21 to £8.72 for over 25 year olds from
£7.70 to £8.20 for 21-24 year olds from
£6.15 to £6.45 for 18-20 year olds from
£4.35 to £4.55 for under 18s from
£3.90 to £4.15 for apprentices NMW calculations
Payments that
must be included when calculating the NMW are:
income
tax and NICs wage
advances or loans and repayments repayment
of overpaid wages items
that the worker has paid for, but which are not needed for the job or paid for
voluntarily, such as meals accommodation
provided by an employer above the offset rate (£7.55 a day or £52.85 a week) penalty
charges for a worker’s misconduct Some payments
must not be included when the NMW is calculated.
These are:
payments
that should not be included for the employer’s own use or benefit, for example
if the employer has paid for travel to work items
that the worker has bought for the job and has not been refunded for, such as
tools, uniform, safety equipment tips,
service charges and cover charges extra
pay for working unsocial hours on a shift Entitlement
There are a
number of people who are not entitled to the NMW, including:
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.
Compliance
Businesses
should make regular checks to ensure compliance with NLW/NMW obligations including:
checking
that they know who is eligible in their organisation taking
the appropriate payroll action where relevant letting
employees know about any new pay rate checking
that staff under 25 are earning at least the right rate of NMW The penalty for
non-payment of the NLW can be up to 200% of the amount owed, unless the arrears
are paid within 14 days. The maximum fine for non-payment is £20,000 per
worker.
The government
is currently committed to raising the NLW to £10.50 per hour by 2024 on current
forecasts.
Employers need
to take action over the coming weeks to ensure that they are ready for the
increase in rates on 1 April 2020 and beyond.