Advice by Paul Holcroft, Associate Director at Croner
By now, minimum wage employers are sure to be familiar with the annual review and subsequent increase of national minimum wage (NMW) rates.
In their announcement regarding the increases scheduled for April 2020, the government declared this represented the ‘biggest ever cash boost’ for UK workers. After all, it is estimated that these adjustments could enable a full-time employee to benefit from a pay rise of up to £930 a year.
As a result, those aged 25 and over, and therefore eligible for the National Living Wage (NLW), will be entitled to receive £8.72 per hour, up from £8.21 an hour previously. At the same time, the minimum wage rates for workers aged between 21-24 will increase from £7.70 to £8.20 an hour; the rate for 18-20-year-olds will increase from £6.15 to £6.45 an hour and those over compulsory school age, but not yet 18 will get an hourly increase from £4.35 to £4.55. The apprentice rate for those under 19 years of age, or 19 and over but in the first year of their apprenticeship will also increase from £3.90 to £4.15 an hour.
Before April, employers ought to work with their payroll department to ensure the new hourly rates are reflected in staff salaries, starting from the relevant pay reference period. Employers must pay staff the correct rates as unintentional errors could result in claims for unlawful deduction of wages. Furthermore, the UK government has the power to issue financial penalties of up to 200% of the arrears owed to each worker. Therefore, as NMW rates have clearly defined age boundaries, it is wise to double-check the information you have on file such as employees’ dates of birth ahead of time to ensure this is correct.
The same claims can also be made if mandatory uniform purchases or salary sacrifice scheme contributions bring staff wages below the national minimum. Therefore, employers should use these NMW increases.
While there may be several months until these new rates are introduced, employers mustn’t leave preparations until the last minute.
With employees becoming increasingly aware of their rights, especially when it comes to pay, any failure to implement these new rates on time is sure to be noticed and could result in particularly costly reputational damage.
