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Time to prepare for changes to the National Minimum and Living wage

Businesses need to prepare for new increases to the National Minimum and Living wage from 6 April this year, including changes to the age at which each rate applies.

Minimum wage rates are reviewed annually and typically change at the start of a new tax year in April. The current hourly wage rates are as follows:

National Living Wage (25 and over) £8.72
21–22-Year-Old Rate £8.20
18–20-Year-Old Rate £6.45
16–17-Year-Old Rate £4.55
Apprentice Rate £4.15
Accommodation Offset £8.20

Employees are entitled to the apprentice rate if they are an apprentice aged:

  • under 19; or
  • 19 or over, and in the first year of your current apprenticeship agreement.

If they are aged19 or over and have completed the first year of their current apprenticeship, they are entitled to the minimum wage for their age.

The NLW and NMW are often increased in line with recommendations from the Low Pay Commission, which reviews wage levels to ensure they are consistent with inflation and other living costs. These hourly rates are due to increase from April to the following:

National Living Wage (lowered to 22 and over from April 2021) £8.91
21–22-Year-Old Rate £8.36
18–20-Year-Old Rate £6.56
16–17-Year-Old Rate £4.62
Apprentice Rate £4.30
Accommodation Offset £8.36

When calculating pay, employers need to take into consideration any changes in a person’s circumstance such as a birthday and/or any costs deducted from a wage, such as where a person is required to supply their own uniform or equipment.

Commission counts towards minimum wage and total pay, including commission, must meet the minimum wage each time a person is paid.

This means that employers must ‘top up’ pay if a person does not make enough commission to earn the minimum wage.

Some parts of a person’s pay do not count towards the minimum wage, including:

  • tips and gratuities
  • premium payments (for example, extra pay for working bank holidays or overtime)
  • a loan from your employer
  • pay advances.

Employers may be required to make some deductions that could leave a person with less than the National Minimum Wage or National Living Wage take-home pay. This includes:

  • tax and National Insurance contributions
  • paying back an advance or overpayment
  • pension contributions
  • trade union fees
  • a charge for accommodation provided by your employer (see accommodation rate information above).

If you require help calculating salaries to ensure you meet the National Living and Minimum Wage requirements our experienced payroll team can help. To find out how we can alleviate the stress of managing your payroll, please speak to us.

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