On Sunday 1st April 2018 the National Living Wage (NLW) and the National Minimum Wage (NMW) rates will be going up.

The NMW will rise as follows:

NMW 2018 - HR Revolution - outsourced HR

The NLW will mean all staff over 25 must be paid at least £7.20 per hour.

Please note that the rate change for the first pay period begins on or after 1 April.  So if this is in the middle of a pay period, the rates do not change until the beginning of the next pay period, for some people say paid quarterly, it can be some time before the rate has to be paid if 1 April is in the middle of a pay period.

A new rate will apply to the next pay reference period that begins on or after the date:

  • a rate increase begins
  • an employee reaches a new age bracket

It is worth noting that the NLW target of £9 by 2020 will have a major impact on your wage bill, changing your pay structures and raise all sorts of HR and payroll issues.

The HMRC has been very clear that employers are more likely to be at risk of getting it wrong for workers paid at or slightly above minimum wage rates; other common minimum wages errors to be aware of are:

  • Unpaid working time – not paying all the hours worked by employees e.g. time spent travelling between work assignments or during training.
  • Deductions from a worker’s pay, or payments by workers to their employer for items or expenses that are connected with their job such as uniforms.
  • Failing to apply the correct rate of pay for apprentices in their second year.
  • If under 19 or in the first year of apprenticeship (refer to age bands). The apprenticeship rate does not apply to Higher Level Apprenticeships.

It is very important that employers understand the new rules so that employees receive at least the minimum pay they are legally entitled to. The HMRC will be stepping up enforcement and failure to pay the correct amount could result in financial penalties of 200% of the pay owed, the risk of publicly named and even the possibility of a criminal prosecution.

Food for thought indeed, and with these increases taking effect soon it is a great time for companies to ensure their policies, procedures and payments systems are updated in line with increased rates and budgets are adapted accordingly.

If you would like any practical advice or guidance please get in touch and see how we can help.