National Minimum Wage for the New Tax Year
This post was originally published on 28 January 2019 and updated on 1 April 2021 for freshness, accuracy and comprehensiveness.
Following on from the Chancellors Budget, further changes will affect how you pay your employees from April 2021.
The hourly rate for the minimum wage depends on your employee’s age and whether they’re an apprentice.
The National Living Wage is for those aged 23 and over, and the National Minimum Wage is for those of at least school leaving age.
The new rates are:
|National Living Wage (23 and over)||£8.91|
|21 to 22 Rate||£8.36|
|18 to 20 Rate||£6.56|
|Under 18 Rate||£4.62|
Minimum wage rates usually change each April.
To help employers check their minimum wage calculations, the government has provided a minimum wage calculator: bit.ly/2bsC9XA. Failure to pay the minimum wage correctly can lead to penalties.
What counts as pay?
Incentive payments and bonus payments, for example, count as pay for minimum wage purposes. Loans, advances of wages, pension payments and rewards under staff suggestion schemes do not. Neither do tips and gratuities. If someone incurs expenses in connection with their employment and is not reimbursed by the employer, then the expense reduces their pay for minimum wage purposes. Consider uniforms: where a salary sacrifice scheme is operated, employers need to look at the figure for pay after sacrifice to assess minimum wage compliance.
What counts as working time?
HMRC reports errors around failure to pay travel time, and whilst staff do not need to be paid for home-to-work travel time, there are some periods of travel time for which there is a minimum wage liability. These include travelling from one work assignment to another, or waiting to collect goods.
HMRC reports many errors in this area. To qualify as an apprentice, there must be an apprenticeship contract and an element of structured training. The apprenticeship rate applies only if an apprentice is under 19, or over 19 and in the first year of their apprenticeship.
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Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.