National Living Wage and National Minimum changes from April 2021
UK employers are required to pay workers at least the statutory minimum wage for their age. Based on age thresholds, two different types of minimum wage apply: the National Minimum Wage (NMW) and the National Living Wage (NLW).
Both are increased annually to adjust to inflation, but in April 2021 the age threshold for the National Living Wage will be reduced as well.
National Minimum Wage
The NMW is payable to workers who are below the age of entitlement to the NLW. Prior to 1 April 2021, the NMW applied to workers above compulsory school leaving age and under the age of 25; from 1 April 2021, the NMW must be paid to workers under the age of 23 and over the school leaving age.
There are three NMW age bands:
- Workers aged 16 and 17.
- Workers aged 18 to 20.
- Workers aged 21 and 22 (prior to 1 April 2021, workers aged 21 to 24).
National Living Wage
The NLW is a higher statutory minimum wage payable to workers whose age is above NLW age threshold. Prior to 1 April 2021, it was payable to workers age 25 and above. From 1 April 2021, the NLW age threshold is reduced; from that date it must be paid to workers aged 23 and above.
There is also a separate NMW rate for apprentices. It is payable to apprentices under the age of 19 and also to those who are over the age of 19 and in the first year of their apprenticeship.
Rates from 1 April 2021
|NLW: Workers aged 23 and above||NMW: Workers aged 21 and 22||NMW: Workers aged 18 to 20||NMW: Workers aged 16 and 17||NMW: Apprentice rate||Accommodation offset|
|£8.91 per hour||£8.36 per hour||£6.56 per hour||£4.62 per hour||£4.30 per hours||£8.36 per day £58.52 per week|
Employers who provide their workers with accommodation are able to pay a lower minimum wage to allow for the cost of the accommodation provided.
The amount that you are obliged to pay is found by deducting the ‘accommodation offset’ from the appropriate minimum wage for the worker’s age. The daily accommodation offset rate can be deducted for each full day for which accommodation is provided. F
or these purposes, a day runs from midnight to midnight. The weekly accommodation offset rate is seven times the daily rate.
Check you are paying the correct rates
Employers should ensure that the amounts that they pay workers on the NLW or NMW from 1 April 2021 are in line with the new rates.
They should also ensure that they have processes in place to identify when a worker moves into a new age bracket. From 1 April 2021, this will include workers aged 23 and 24 who will be entitled to the NLW from that date.