Anybody working, aged 25 or over and not in the first year of an apprenticeship, is legally entitled to the National Living Wage (NLW). This new rate is essentially a Minimum Wage for the over 24s. The Government is committed to increasing this every year.
Employers will need to make sure they are paying their staff correctly, as the NLW will be enforced as strongly as the NMW.
The table below shows the current NMW and NLW rates:
|
Apprentices* |
16 and 17 |
18 - 20 |
21 - 24 |
25 and over |
National Minimum Wage |
£3.50 |
£4.05 |
£5.60 |
£7.05 |
- |
National Living Wage |
- |
- |
- |
- |
£7.50 |
*Under 19, or 19 and over in the first year of their apprenticeship
Please note, there are separate minimum rates of pay for agricultural workers. Visit www.gov.uk/agricultural-workers-rights/pay-and-overtime for more information.
Who is covered by the NMW?
NMW applies to all workers, with certain exceptions such as:
- children who are still of compulsory school age
- those who are genuinely self employed
- family members working in the family business
- people working and living as part of a family (e.g. au pairs)
- voluntary workers
How is the NMW calculated?
The Regulations set out a rather complex procedure detailing the calculation of the NMW.
Benefits in kind, expenses, certain allowances and most deductions are not included.
Enhanced payments for particular work will not count, but incentive or profit related payments will be included.
What working time counts for NMW?
Job-related travelling and training time is included. Periods of holiday or absence do not count (even though holiday pay is now obligatory), nor does time taken as rest breaks or industrial action.
What if the pay is not time-related?
Piece workers and other non-time workers (e.g. pub landlords) may come to an agreement with their employer about a fair estimate of hours.
What about Family Businesses?
Although there is an exemption for family members working in the family business, the regulations specifically refer to the employer’s family. If the family business (i.e. the employer) is a limited company, then it does not have a family. Even if the family business operates as a sole trade or partnership, the only family members exempted are those who actually live at home.
What about Company Directors?
In common law, company directors are classed as office holders and can do work and be paid for it in that capacity. This is true no matter what sort of work they do and how it is rewarded.
The NMW does not apply to office holders, unless they also have contracts which make them workers.
It is unlikely that a company director will have an implied contract which makes him a worker. The rights and duties of an office are defined by that office, and it exists independently of the person who fills it. Directors can be removed from their office by a simple majority of the votes cast at a general meeting of the company. This contrasts with the rights and duties of an employee which are defined in a contract of employment.
What records have to be kept?
For workers earning in excess of £12,000 per year, employers simply have to keep sufficient records to demonstrate that the NMW has been paid. For workers earning less than £12,000 per year, full details of the NMW calculation must be kept. Records should be kept for six years.
Confused and need help? Outsource your payroll headaches to us.
As McDade Roberts have a dedicated payroll team, we keep our clients up to date with the latest changes so they don’t have to gather the information from elsewhere.
If you have a payroll or wages question we can help you with, feel free to give the payroll team a call on 01772 786 858 or email office@mcdaderoberts.co.uk. Your first consultation is always free so you have nothing to lose.