Take note, new national minimum wage rates confirmed

24 March, 2016
by: Cripps Pemberton Greenish

wage increaseTake note, new national minimum wage rates confirmed

Hidden in the 2016 budget the government announced the latest national minimum wage rates.

With the penalties for failing to pay the minimum wage increasing and employees becoming more aware of their rights and entitlements, it is important employers are aware of the changes.

National Living Wage from 1 April 2016:

As of April the new National Living Wage for those aged 25 and over comes into effect at a rate of £7.20 an hour. However, it will not increase again in October 2016 – see below.

This should not be confused with the voluntary Living Wage which is set by the Living Wage Foundation – an organisation which campaigns for minimum hourly pay based on the cost of living.

National Minimum Wage from 1 October 2016:

21 to 24 years old: £6.95 (currently £6.70)

18 to 20 year olds: £5.55 (£5.30)

16 to 17 year olds: £4.00 (£3.87)

Apprentices: £3.40 (3.30)

With effect from April 2017 the National Living Wage and the National Minimum Wage rates shall be adjusted at the same time.

Penalties and claims

HMRC enforces the statutory minimum pay and focuses its enforcement on high risk sectors – currently social care, hair dressing and retail.

Penalties for non-payment are increasing from 100% to 200% of the total underpayment – although this will be halved if paid within 14 days. The maximum penalty will remain at £20,000 per worker.

An employee that doesn’t receive the applicable minimum pay could bring a claim in the employment tribunal for unauthorised deductions from wages or choose to make a claim for breach of contract in the civil court.

Solution

Employers should have systems in place to ensure employees receive at least the applicable hourly rate. It is also worth noting that an increase in hourly rate may impact other costs – for example pension and national insurance contributions.