Total Financial Wellbeing

Keeping up with changes to the National Living Wage

This April will see significant changes to the National Living Wage (NLW) with the government lowering the age at which workers will qualify as well as the annual increase in the rate. It can be costly for employers to breach NLW and National Minimum Wage (NMW) laws. Last year saw employers forced to repay millions in underpayments in addition to fines. They also take a reputational risk as HMRC names and shames offenders. Here, we take a look at the new rates and what to do to make sure you comply.

The NLW and the NMW

Anybody working aged 21 or over and not in the first year of an apprenticeship is legally entitled to the NLW.

Despite its name, this rate is essentially a NMW for the over 20s. The government is committed to increasing this every year.

The NLW rate changes every April and employers will need to make sure they are paying their staff correctly as the NLW will be enforced as strongly as the NMW.

The table below shows the NMW and NLW rates applying from 1 April 2024:

  Apprentices* 16 and 17 18-20 21 and over
NMW £6.40 £6.40 £8.60 -
NLW - - - £11.44

*Under 19, or 19 and over in the first year of their apprenticeship

Who does not have to be paid the National Minimum Wage?

NMW and NLW apply to all workers, with certain exceptions such as:

  • those who are genuinely self-employed
  • workers who are still of compulsory school age
  • company directors
  • volunteers and voluntary workers
  • family members living in the family home and working in the family business
  • non-family members living and working with the family, for example au pairs
  • students doing work experience as part of a higher or further education or a work placement up to a year.

There are more exceptions to the NMW and NLW. Visit this link for further guidance.

Beware the family company trap

Although there is an exemption for family members working in the family business and residing in the family home of the employer, the Regulations specifically refer to the employer's family. If the family business (i.e., the employer) is a limited company, then it does not have a family. Even if the family business operates as a sole trader or partnership, the only family members exempted are those who actually live in the home of the employer.

Breaching NMW laws

The government can impose penalties on employers that underpay their workers in breach of the minimum wage legislation. The penalty can be as much as 200% of arrears owed to workers. The maximum penalty is £20,000 per worker.

The penalty is reduced by 50% if the unpaid wages and the penalty are paid within 14 days. 

Periodically the government publishes a list of employers who have not complied. The reasons employers fail to comply vary and include topping up pay with tips and deducting sums for uniforms, among others.

Naming and shaming

This year the government named and shamed over 500 employers for failing to pay their lowest paid staff the minimum wage.

Together these firms were found to have failed to pay their workers almost £16 million in a breach of NMW law, leaving around 172,000 workers out of pocket.

The companies named by the government ranged from major high street brands to small businesses and sole traders. The government reiterated that no employer is exempt from paying their workers the statutory minimum wage.

Calculating the NMW and NLW

Calculating the NMW and the NLW can prove to be complex. Please contact us to discuss any concerns you may have over this or any other payroll matters.