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National minimum and living wage

6 February, 2018

The qualification age for the adult national minimum wage (NMW) is now 21.

The NMW for those aged 21 and over is currently £7.05.

Workers aged 18 to 20 must be paid a minimum of £5.60 per hour, while pay for under-18s is £4.05 per hour.

There is an apprenticeship wage of £3.50 per hour for those under the age of 19 and for people in the first year of their apprenticeship.

A new ‘National Living Wage’ (NLW) was introduced in 2016.

Those employees aged 25 and over will get a ‘premium’ on top of the current NMW, as previously set out, bringing the total to £7.50 per hour instead of £7.05 per hour.

The rates will now usually rise in April each year, although this is not guaranteed.

Employers need to be careful to ensure that they are correctly calculating the NMW & NLW.

For instance, bonuses, commission payments and tips paid through the payroll can be counted towards it, but over time, pension contributions and tips not paid through the payroll cannot.

  • Care must also be taken in respect of deductions.
  • When you make a deduction from a worker’s pay, it will often reduce the minimum wage.
  • However, the following deductions are permitted and will not reduce the minimum wage rate:
  • Deductions of income tax and National Insurance contributions (NICs)
  • Deductions allowed under the worker’s contract which relate to a stated misconduct or payment by the worker of a stated penalty, for example for loss of equipment or a shortfall in takings
  • Deductions because of an advance of wages or a loan
  • Deductions for the purchase of shares
  • Deduction to recover an accidental overpayment of wages
  • Deductions for trade union subscriptions
  • Deductions for pension contributions
  • Voluntary payments by the worker for the purchase of goods i.e. purchases from a staff shop

HM Revenue and Customs are responsible for enforcing the minimum wage and criminal prosecutions are likely in serious cases.

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