The NMW Increase
The new hourly rates are as follows:
|
|
Previous Rate |
New Rate |
An increase of: |
|
Aged 21 and over |
£11.44 |
£12.21 |
£0.77 |
|
Aged 18 to 20 |
£8.60 |
£10.00 |
£1.40 |
|
Ages 16 to 17 |
£6.40 |
£7.55 |
£1.15 |
|
Apprentice rate |
£6.40 |
£7.55 |
£1.15 |
Employers should ensure they update their payroll systems and adjust their budgets to accommodate for this increase in good time. They should also ensure ongoing monitoring of not only employee's wage packets to ensure compliance, but also to capture any notable age changes of any employees to ensure rate of pay aligns with the correct NMW rate band.
Common Errors
Whilst each employer may face unique NMW compliance challenges, we hope to assist by flagging a few of the common errors that employers have fallen foul of in the past:
The Apprentice Rate
The apprentice rate can cause confusion for some employers and mistakes in providing the appropriate rate can be common.
Apprentices entitled to the NMW band will be individuals who are either employed on apprenticeship schemes or are directly engaged under a contract of apprenticeship.
Importantly, where an apprentice is aged 19 and over and has completed the first year of their apprenticeship, they will cease to be entitled to the apprenticeship rate and instead be eligible for whatever their age appropriate rate is.
For example, a 30 year old apprentice that is yet to finish the first year of their apprenticeship will be entitled to £7.55 per hour from 1st April 2025, but when finishing the first year of their apprenticeship will switch to being entitled to the National Living Wage rate of £12.21 per hour.
Likewise, a 19 year old apprentice will be entitled to £7.55 an hour for the first year of their apprenticeship and then £10.00 an hour once they finish their first year.
The apprentice rate can cause confusion as there are effectively two ongoing elements that require monitoring: the worker's age and the stage of their apprenticeship. Failure to keep track of one of these can result in underpayments.
Unpaid Working Time
It is also important to remember that workers are entitled to pay for all time spent working, which will often mean additional consideration of a worker's full responsibilities and role.
For example, if an employee works a 7-hour shift at a cafe but is also expected to arrive half an hour early to open and set up, and stay half hour later to clean and close down, then they are entitled to be paid for this additional hour of work at the relevant NMW rate.
It is therefore important that employers keep track of their employee's role and responsibilities to ensure full payment if made for all of their working hours to avoid underpayments.
Travel Time
Similarly, employers can often misconstrue the NMW requirements when it comes to paying workers for travel time.
An employer does not have to pay for the period of time that their employee is commuting to and from the workplace as this is not working time. However, employers should understand that travel that is directly part of the employment will require to be paid for.
For example, an employee who commutes 1 hour to and from work will not be entitled to pay for this time spent travelling. However, if that employee is required to travel from one work site to another during the working day, this travel time requires to be included for pay purposes.
What enforcement steps do HMRC take?
HMRC is strict in its ongoing surveillance and enforcement against employers failing to meet the minimum rates. Where HMRC finds NMW has not been paid to a worker (or workers) they will issue a Notice of Underpayment directly to the employer. These notices set out not only the arrears due to the worker(s) but also impose a penalty for non-compliance.
These penalties can be significant. Penalties are equal to 200% of the total amount underpaid up to a limit of £20,000 per worker.
Additionally, HMRC often publicly name non-compliant employers in the press. The public naming and shaming can cause significant brand and reputational damage. All the more reason for employers to be diligent in their pay practices and do all they can to swiftly and correctly implement the increased rates when they land on the 1st April 2025.
If you have any concerns about NMW or your pay policies and practices, please do not hesitate to get in touch. Our Employment and Tax teams regularly work with employers of all types and sizes in relation to National Minimum Wage compliance.
We can support and advise you on your policies and best practices for ongoing monitoring to ensure that you do not inadvertently reduce wage levels below the legal minimum.
If the worst happens however, our team of experts can support your business through an HMRC enquiry or investigation and are experienced in supporting employers where there are allegations of non-compliance. We recommend that you seek privileged legal advice before providing any information or speaking to a NMW officer or HMRC as part of a payroll enquiry.
Please do not hesitate to contact Caroline Colliston or Joanne Frew or your usual DWF contact.
This article was authored by Adam MacDonald, Trainee solicitor
