Following recommendations made by the Low pay commission (LPC) at the end of October 2020 the government has confirmed that the National minimum wage (NMW) and National Living Wage (NLW) will both be increasing from the 1 April 2021.
The
Low pay commission (LPC) is made up of 9 people that advises the Government each year, with commitments to the Government’s goal of ending low pay. This year the Government has accepted the recommendations made in full by the LPC.
You can find a summary of there findings
here.
| |
Rate from April 2020 |
Rate from April 2021 |
Increase |
| National Living Wage (23+) |
£8.72 |
£8.91 |
2.2% |
| 21-22 Year Old Rate |
£8.20 |
£8.36 |
2.0% |
| 18-20 Year Old Rate |
£6.45 |
£6.56 |
1.7% |
| 16-17 Year Old Rate |
£4.55 |
£4.62 |
1.5% |
| Apprentice Rate |
£4.15 |
£4.30 |
3.6% |
| Accommodation Offset |
£8.20 |
£8.36 |
2.0% |
Key points:
- The 23-24 age category for the National Minimum Wage has been abolished, following the lowering of the age of the eligibility for the higher National Living Wage to 23 years old, making the higher rate available to more people than was previously the case.
- The NMW for those aged 21 and under is being increased by less than the NLW.
- The NLW threshold was moved to a lower age bracket after 7 arguments were put forward to recommend this change, including that most people aged 23-24 were already being paid at least the full NLW, stakeholders generally agreed that the age threshold should be reduced and research indicates that the change will not negatively impact employees of that age.
Enforcement
There were 2,043,000 employee jobs with employees aged 16 years and over who were paid below the National Minimum Wage or National Living Wage (7.2% of employee jobs) in April 2020 according to the office of national statistics.
Employers who do not pay at least the appropriate minimum wage face penalties as well as being named and shamed by HMRC.
What should employers be doing?
Keep a record of payroll
There is a requirement under the NMW Regulations to maintain sufficient records to evidence that the NMW has been paid for at least the last 3 years. It is a criminal offence not to do so. As an added pressure, a presumption will be implied that an employee has not been paid the NMW unless an employer can prove otherwise.
Consider 'salary sacrifice'
For example, this may be where employees opt for increased pension contribution or childcare vouchers by way of deduction from their gross salary. If so, it is important that this must not take the employee's average hourly pay below the NMW. The Government has confirmed (following concerns that this denies the lowest paid the benefit of the tax breaks brought by a salary sacrifice scheme), that, whilst an employer caught paying below the NMW on this basis alone would not be subject to a penalty, they could still be 'named and shamed'.
Consider your employees' 'Working Time'
This may or may not be applicable depending on your sector. The 'working time' concept does not necessarily mean just the time spent by the employee doing the job. To give an example, if there any mandatory procedures for an employee at the beginning or end of their working day, e.g. security checks or drug and alcohol tests, these processes may be included in working time. Additionally, staff working through unpaid breaks may raise issues as they are not being paid for the working time.
Moore (South) can provide expert business advice, bookkeeping and payroll services. If you would like to hear how we can help you, please click
here.