From 1 April 2020, nearly three million workers are set to benefit from increases to the National Living Wage (NLW) and minimum wage rates for younger workers, according to estimates from the independent Low Pay Commission.
From 1 April 2020, the NLW will rise from £8.21 per hour to £8.72 per hour. The new rates should mean a pay rise of some £930 over the course of the year for a full-time worker on the National Living Wage. Younger workers who receive the National Minimum Wage (NMW) will also see their pay boosted.
Employers need to make sure they are ready for the new rates.
The compulsory National Living Wage is the national rate set for people aged 25 and over. The NLW is enforced by HMRC alongside the national minimum wage which they have enforced since its introduction in 1999.
Generally, all those who are covered by the Minimum Wage, and are 25 years old and over, will be covered by the NLW. These include:
- most workers and agency workers;
- casual labourers;
- agricultural workers;
- apprentices who are aged 25 and over.
The rates from 1 April 2020, the NMW will rise across all age groups, including increases:
- from £8.21 to £8.72 for over 25 year olds (NLW);
- from £7.70 to £8.20 for 21-24 year olds;
- from £6.15 to £6.45 for 18-20 year olds;
- from £4.35 to £4.55 for under 18s;
- from £3.90 to £4.15 for apprentices.
There are a number of people who are not entitled to the Minimum Wage, including:
- self-employed people;
- volunteers or voluntary workers;
- company directors;
- family members, or people who live in the family home of the employer who undertake household tasks.
All other workers including pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the NMW.
Businesses should make regular checks to ensure compliance with NLW/NMW obligations including:
- checking that they know who is eligible in their organisation;
- taking the appropriate payroll action where relevant;
- letting employees know about any new pay rate;
- checking that staff under 25 are earning at least the right rate of NMW.
The penalty for non-payment of the NLW can be up to 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment is £20,000 per worker.
The government is currently committed to raising the NLW to £10.50 per hour by 2024 on current forecasts.
Employers need to take action over the coming weeks to ensure that they are ready for the increase in rates on 1 April 2020 and beyond.