Increase pay rise for both National Minimum Wage and National Living Age
25th March, 2020
National Living Wage (“NLW”) is the minimum hourly wage that employers must legally pay to workers aged 25 and above.
NLW is set to increase from 1 April 2020 by 6.2% – the biggest percentage increase ever. The hourly rate will rise from £8.21 to £8.72 which means a full time worker can expect an annual pay rise of up to £930.
It is not just workers over 25 who can expect a financial boost, the National Minimum Wage (“NMW”), being the wages for both apprentices and workers aged 24 and younger, is also set to rise across age groups, including:
• a 6.5% increase from £7.70 to £8.20 for 21-24 year olds;
• a 4.9% increase from £6.15 to £6.45 for 18-20 year olds;
• a 4.6% increase from £4.35 to £4.55 for Under 18s; and
• a 6.4% increase from £3.90 to £4.15 for Apprentices (apprentices under 19 years or those over 19 in their first year of their apprenticeship).
The rise in wages matches the Government’s 2019 proposal to increase NLW over the next five years to £10.50 an hour by 2024, this could equate to an extra £4000 a year for a full time worker.
Moreover, the Government intends to reduce the age threshold for NLW so that it applies to those aged 23 and over from 2021 and to those aged 21 and over by 2025 in line with the Low Pay Commission’s recommendations.
Who will this benefit?
The rise in wages is expected to benefit around 3 million workers across the UK. Of all the industries, catering, retail and agricultural work could see the most change as up to 40% of workers aged 21 and older fall under the minimum wage bracket according to estimates by the BBC.
Women in particular are likely to benefit from this upcoming change as many of these industries are made up of a predominately female labour force.
Does having a different rate of pay for younger workers amount to age discrimination?
It is often argued that the different rates of pay for younger workers amount to age discrimination.
However there is a special exception under paragraph 11 and 12 of the Equality Act 2010 which means that if A and B are employed under the same role, it is not discriminatory to pay A less than B if the NMW for a person of A’s age is less than the NLW.
Therefore providing that the employer’s policy is consistent amongst all age groups (i.e. all 24 year olds receive NMW for the same role) an employer should not be liable for age discrimination.
The Government’s rationale for a reduced wage for younger workers stems from the idea that young people have a greater need to acquire experience therefore a lower NMW incentivises businesses to employ them.
What will happen if an employer is non-compliant?
NMW is monitored by HMRC who have a wide-range of enforcement powers including “naming and shaming”, mandatory recovery of underpayments and even criminal prosecution. Section 31 of the National Minimum Wage Act 1988 makes it a criminal offence to:
• refuse or wilfully neglect to pay the NMW or NLW;
• fail to keep the required records;
• provide false records or information;
• intentionally obstruct or delay an enforcement officer; or
• refuse to answer questions or provide information to an enforcement officer.
In April 2018 the Government published details of 179 employees who failed to pay staff the NMW and issued fines totaling 1.3 million. It is therefore crucial for employers to ensure that they keep up to date with current legislation to avoid harming their brand image, hit with a hefty fine or prosecution.
Top tips for employers
• Keep up to date with current legislation and regularly undertake an audit/review of payments made to workers.
• Keep records of the hours worked by, and payments made to workers to ensure that workers are receiving the NMW or NLW. These records must be made available for both HMRC enforcement officers and workers who request them.
• Ensure policies are applied consistently amongst all age groups.
**Changes from 1 April 2020**