The New National Minimum Wage - Are you paying the right amount?

Draft legislation implementing increases to national minimum wage rates from 1 April 2017 has been published.

National minimum wage

From 1 April 2017 the rates for the national minimum wage will rise as follows (figures in brackets show the current rate):

  • Workers aged 25 and over: £7.50 (£7.20)

  • Workers aged 21 to 24: £7.05 (£6.95)

  • Workers aged 18 to 20: £5.60 (£5.55)

  • Young workers aged under 19 but above compulsory school age who are not apprentices: £4.05 (£4.00)

  • Apprenticeship rate: £3.50 (£3.40)

National living wage

The national living wage for workers aged 25 and over came into force last year, on 1 April. At the time, the government announced that its target was to increase the national living wage to £9 an hour by 2020.

The national minimum wage was previously updated every year in October but, from 1 April 2017, all national minimum wage rates including the national living wage will be updated at the same time.

The national living wage should not be confused with the 'Living Wage' or 'London Living Wage' which is an entirely voluntary hourly rate of pay promoted by the Living Wage Foundation. It is set independently and updated annually to reflect the basic cost of living in the UK.

Penalties and non-compliance

Employers need to ensure that they comply with the new rates as the penalties for failure to do so are now significant: 200% of arrears (halved if employers pay within 14 days) up to a maximum penalty of £20,000 per worker.

Many examples of non-compliance are not intentional but occur as a result of administrative failings. For example, employers need to make sure they have the correct systems in place to identify when workers have a birthday and move from one rate to another.

The increase in minimum wage rates will also increase other costs such as pension contributions and national insurance contributions so organisations need to factor these into budgets for the coming year.

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