The National Living Wage and the National Minimum Wage

At McDade Roberts we have a dedicated payroll department to help our clients get rid of payroll headaches. One question our team are asked is about the National Living Wage and National Minimum wage. Read on for more information.

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 rate is essentially a Minimum Wage for the over 24s. The Government is committed to increasing this every year.

The table below shows the NMW and NLW rates applying from 1 April 2020:



16 and 17

18 - 20

21 - 24

25 and over

National Minimum Wage






National Living Wage






*Under 19, or 19 and over in the first year of their apprenticeship

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 living in the family home and 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 are 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. Full guidance on calculating the correct rate can be found here: Calculating the Minimum Wage.

What Records Have To Be Kept?

For workers earning in excess of £120 per week, employers simply have to retain their Pay as You Earn (PAYE) and national insurance contribution (NIC) records to demonstrate that the NMW has been paid. For workers earning less than £120 per week, full details of the NMW calculation must be kept.

Records should be kept for a minimum of three years.

What Rights Does The Worker Have?

Individuals have the right to apply to a court or tribunal for non payment of the NMW. They are also protected from suffering any loss for such proceedings.

Criminal Offences

There are six criminal offences relating to the NMW:

  • refusal or wilful neglect to pay the NMW
  • failing to keep or preserve NMW records
  • causing or allowing a false entry to be made in NMW records
  • producing or furnishing false records or information
  • intentionally delaying or obstructing a compliance officer
  • refusing or neglecting to answer questions, give information or produce documents to a compliance officer

The most serious criminal cases are triable in the Crown Court. This means that employers who deliberately fail to pay the NMW may face a potentially unlimited fine.


The main means of enforcing the NMW are through:

  • compliance officers of HM Revenue & Customs (HMRC)
  • agricultural wages inspectors for the NMW in the agricultural sector (and the agricultural minimum wage)
  • claims by workers before tribunals and courts

HMRC compliance officers will act in response to complaints that an employer is not paying the NMW - whether the complaint is by workers or others. They will also investigate where there may be a risk of non-payment.

Notice of Underpayment

If a compliance officer believes that an employer has failed to pay at least the NMW to a worker, the officer may serve a notice of underpayment, requiring the employer to:

  • repay arrears of the NMW to each worker named on the notice
  • pay a penalty to the Secretary of State totalling 200% of the total underpayment for all the workers shown on the notice as underpaid for pay reference periods starting on or after 6 April 2009, with a minimum penalty of £100 and a maximum penalty of £20,000 per worker
  • The penalty will be reduced by 50% if the employer fully complies with all the terms of the notice of underpayment within 14 days of service of the notice.

The employer may appeal against the notice of underpayment within 28 days of service of the notice. An appeal must be made to the employment tribunal (or industrial tribunal in Northern Ireland). If the employer does not comply with the notice of underpayment, HMRC can take a case to a tribunal or County Court on behalf of the worker, or prosecute the employer.

How Can McDade Roberts Help?

At McDade Roberts we keep up to date with the latest rules so that we can advise our clients in a straight forward way. If you would like advice on any payroll matter, just give us a call. The first consultation is free so you have nothing to lose.