In this week’s Q&A, Croner-i experts explain the April increases to national minimum wage rates and how to avoid breaching the rules
My client has approached me about the increases to national minimum and living wage (NMW/NLW) from April. They are worried about breaching the rules, as paying a fine will be more costly than ever. I would like to reassure them and explain common breaches of NMW/NLW, so they know what to avoid.
From 1 April 2023, the following increases to NMW/NLW will come into force:
|National living wage||Rate from April 2023||Rate from April 2022||Increase %|
|23 years old plus||£10.42||£9.50||9.7|
|21-22 year old rate||£10.18||£9.18||10.9|
|18-20 year old rate||£7.49||£6.83||9.7|
|16-17 year old rate||£5.28||£4.81||9.7|
The increases apply in the next ‘pay reference period’ after the increase. For example, if X gets paid on the 15th of the month, the old rate applies until the 15th, and the new one from the 16th. To avoid misunderstandings, your client might want to explain this to their staff.
Falling foul of the law
The consequences of failing to pay NMW/NLW can be costly:
- fines at 200% of arrears (reduced to 100% if paid within 14 days, subject to a maximum of £20,000 per unpaid worker);
- repayment of arrears, calculated at the current rate of NMW/NLW;
- criminal proceedings for the most serious breaches.
Keeping up with entitlement
16% of those publicly ‘named and shamed’ by the government for breaching the NMW/NLW blamed failing to increase pay in line with entitlement. Your client should therefore be careful keep on top of employee birthdays.
If your client employs apprentices, that rate is only paid in the first year; thereafter, only to those under 19. Your client should therefore be aware of when they:
- move into year two (if 19 and over);
- turn 19 (after year one); and
- finish their apprenticeship.
These events mean they must be paid the appropriate NMW/NLW rate from the next ‘pay period’.
Certain deductions can cause pay to fall below NMW/NLW, and not breach the law, such as income tax and National Insurance; recovery of accidental overpayment or pay advances; pension contributions; student loan repayments; trade union fees; and accommodation offsets.
However, other deductions and expenses can be unlawful and lead to an underpayment of NLW/NMW. These include deductions for:
- travel costs (except commuting costs); and
- training courses.
For example, where an employee must purchase a uniform, their total pay minus the uniform cost cannot be below the applicable NLW/NMW rate.
Where travelling is essential to the job, eg, delivery drivers / travelling salespeople / domiciliary carers, they should be paid to travel between clients. Time spent travelling from home to their starting point (their commute) need not always be.
This depends on whether the trial is to test ability or provide value. Working a normal shift where they are not observed or given guidance is likely to attract the need to pay NMW/NLW.
- chef prepares dishes under observation – likely a genuine trial, no pay entitlement;
- chef works a kitchen service and is left to work alone – likely providing value and not a genuine trial, NMW/NLW due.
Please also note other changes from April:
- family friendly statutory payments increase from £156.66 to £172.48 on 2nd April 2023;
- statutory sick pay (SSP) increases from £99.35 to £109.40 on 6 April 2023.
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