National Minimum Wage 2019
The National Minimum Wage (NMW) rates increase in April, and this year they are increasing by around 4% on average.
National Minimum Wage Rates 2019
|Aged 25 and Over (National Living Wage)
|Aged 21 – 24
|Aged 18 – 20
These rates are proposed each year by the Low Pay Commission. The government would then accept the proposals and add them to the budget for the next tax year, where HMRC then has the responsibility for enforcing the law.
There is also the voluntary organisation the Living Wage Foundation, who propose wage rates based upon the cost of living which are generally higher than the HMRC minimums. The Living Wage Foundation also applies a weighting for living in London where costs are higher.
The minimum wage applies to workers in the UK, and takes into account the basic pay or salary as well as other payments or deductions. Salaried staff are also considered for the minimum wage, it is not just hourly paid workers.
Examples for salaried staff
32 year old salaried worker, working 37 hours per week: £1316.34 per month
37 x 52 = 1924 hours per year
Minimum salary would equal = 1924 x £8.21 = £15 796.04 pa
22 year old salaried worker, working 40 hours per week: £1334.67 per month
40 x 52 = 2080 hours per year
Minimum salary would equal = 2080 x £7.70 = £16 016.00 pa
(These are minimums and care would still be need to make sure the NMW requirements were met in any 12 week period – see below)
National Minimum Wage Calculations
National minimum wage pay is not necessarily the same as gross pay, taxable pay or NICable pay however, and can get complicated where pay structures are not straightforward.
If workers receive bonuses or commissions then a 12 week average could be used to check the worker is receiving at least the correct hourly rate. For this you would divide the total pay received by the total hours worked, which would then give an average hourly rate.
Care needs to be taken with salary sacrifice deductions, as these will reduce the pay for NMW calculations. Common salary sacrifice arrangements include pensions, childcare vouchers and cycle to work schemes. But there are other arrangements too.
Deductions for things like uniform can also be used to reduce the pay for NMW calculations, so employers do need to check they comply as the fines can be high if they fail in their obligations. If a deduction can be shown to benefit the employer then it may well reduce the NMW, and advice should be taken.
If an employee feels they have been paid below the NMW their first course of action is to discuss this with their employer and see if they can find a solution. ACAS offer an early conciliation service if a dispute between an employee and employer is not quickly resolved, and there is also the HMRC enforcement process.
In a simple pay structure it is very straightforward to check that the hourly rate is greater than the NMW rates, but where there may be deductions or variable hours it can get more complicated. April is a good opportunity for employers to check the pay rates they have in place and adjust as needed.