The national minimum wage and the national living wage

The national minimum wage and the national living wage

National minimum wage

An employer must pay their workers a minimum amount per hour as defined by law. The national minimum wage (NMW) applies to workers who are under the age of 25.

Who is covered by the NMW?

NMW applies to all workers, with certain exceptions such as:

  • those under the age of 16
  • apprentices (applies to apprentices under 19 and those aged 19 or over who are in their first year)
  • those who are genuinely self-employed
  • family members working in the family business
  • people working and living as part of a family (such as au pairs)
  • voluntary workers.

National living wage

The National Living Wage (NLW) is the minimum pay per hour most workers aged 25 and over are entitled to by law.

The rate will depend on a worker’s age and if they are an apprentice.

What are the hourly rates of NMW and NLW?

Age group April 2019  April 2018
 National Living Wage (25+) £8.21 £7.83
 NMW (21-24) £7.70 £7.38
 NMW (18-20) £6.15 £5.90
 NMW (16-17) £4.35 £4.20
 Apprentice NMW £3.90 £3.70
 Accommodation Offset £7.55 a day£7 a day

As Sports Direct and John Lewis found out, failing to comply can be very costly in terms of financial penalties and negative publicity.
HMRC routinely names and shames employers that have broken minimum wage rules, some of which may be arithmetic or technical mistakes by employers who have intended to comply with the law.

Arrangements requiring employees to buy work uniform out of their wages, and Christmas saving schemes have been ruled as in breach of minimum wage. We can advise you about the more complicated requirements.

For that reason, we recommend that you look further at employer obligations which are set out in HMRC’s guide to national minimum wage enforcement.

This includes:

  • Entitlement to the NMW and NLW
  • Powers of compliance officers
  • Notices of underpayment
  • Penalties
  • Minimum wage penalty percentages
  • Criminal offences.
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CloudCo Group is a Chartered Management Accountancy Firm offering premium accounting services to a range of businesses and individuals from their office in Milton Keynes.

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