The National Living Wage and the National Minimum Wage
Anybody working, aged 25 or over and not in the first year of an apprenticeship, is legally entitled to the National Living Wage (NLW).
For those under 25, the National Minimum Wage (NMW) rates apply.
Both rates are amended in April each year.
Employers should be aware that NLW rules will be enforced as strongly as the NMW.
Rates from April 2018
National Minimum Wage
- 16 and 17 £3.70 (apprentice rate)
- 16 and 17 £4.20
- 18 - 20 £5.90
- 21 - 24 £7.38
National Living Wage
- 25 and over £7.83
Who does NMW apply to?
NMW applies to all workers, with only some exceptions such as:
● children of compulsory school age
● those who are genuinely self employed
● family members living in the family home and working in the family business
● people working and living as part of a family (e.g. au pairs)
● voluntary workers
How is NMW calculated?
Benefits in kind, expenses, certain allowances and most deductions are not included.
Enhanced payments for particular work will not count, but incentive or profit related payments will be included.
What counts as working time for NMW?
Job-related travelling and training time is included.
Periods of holiday or absence do not count (even though holiday pay is obligatory), nor does time taken as rest breaks or industrial action.
Although there is an exemption for family members working in the family business, the regulations specifically refer to the employer’s family.
If the family business (i.e. the employer) is a limited company, then it does not have a family.
Even if the family business operates as a sole trade or partnership, the only family members exempted are those who actually live at home.
In common law, company directors are classed as office holders and can do work and be paid for it in that capacity. This is true no matter what sort of work they do and how it is rewarded.
The NMW does not apply to office holders, unless they also have contracts which make them workers.
It is unlikely that any company director will have an implied contract to make him/her a worker.
The rights and duties of an office are defined by that office, and the office exists independently of the person who fills it.
Directors can be removed from their office by a simple majority of the votes cast at a general meeting of the company. This contrasts strongly with the rights and duties of an employee which are defined in a contract of employment.
There are six criminal offences relating to the NMW:
● refusal or wilful neglect to pay the NMW
● failing to keep or preserve NMW records
● causing or allowing a false entry to be made in NMW records
● producing or furnishing false records or information
● intentionally delaying or obstructing a compliance officer
● refusing or neglecting to answer questions, give information or produce documents to a compliance officer
The fine on conviction for each offence is up to £20,000 where tried in the magistrates' court or a potentially unlimited fine for the most serious criminal cases which are tried in the Crown Court.
HMRC compliance officers act in response to any complaints that an employer is not paying the NMW - whether the complaint is by workers or others.
HMRC can use the search and seize powers in the Police and Criminal Evidence Act 1984 when investigating criminal offences under the National Minimum Wage Act and officers may carry out inspections of employers at any time. There is no requirement to provide reasons for an inspection. They must show an identity document on request and have considerable powers to obtain information.
If you are worried about these rules please talk to us.
The simplest solution is always to comply and we can help you with that.