From today, workers will receive a boost in pay with the National Living Wage and National Minimum Wage set to increase. But what does this mean in practice? And how can you make sure you are paying your staff the correct amount?
Living wage, national living wage, minimum wage – it's all so confusing for employers these days, with the goal posts and recommendations constantly moving.
So how much should you pay your staff?
A bit of history
Back in April 2016 we moved from the minimum wage to the national living wage.
This entitles workers aged 25 and over to be paid at least £7.20 an hour with plans to increase this gradually to £9 an hour by 2020.
This weekend it goes up to £7.50 an hour.
Meanwhile, alongside the national living wage, the living wage was introduced.
This was set up by the Living Wage Foundation and is calculated according to the actual cost of living in the UK.
It's not compulsory for employers, so is often called the voluntary Living Wage to avoid confusion with the National Living Wage.
So far 3,000 employers have signed up to this scheme.
Under it, the lowest rate of pay is calculated according to the cost of living in the UK based on the changing cost of a basket of groceries.
The amount is set by the charity Living Wage Foundation, and accredited employers include local authorities, NHS trusts, banks, retailers, charities and construction companies.
It is currently set at £8.25 an hour outside of London and £9.40 an hour in the capital - notably more than the Government's impending targets.
These rates also apply to over-18s “in recognition that young people face the same living costs as everyone else”.
The rate is calculated every November, and accredited employers are committed to any increases.
Pay packet boost
From today - Saturday April 1st - workers can expect a boost to their pay packets as the National Living Wage goes up, rising from £7.20 and hour to £7.50 an hour.
The four-per-cent rise will see those working a 37.5-hour week get paid £281.25 a week instead of the previous £270. That’s an increase of £585 a year.
Those under 25 however may still receive less pay than their older colleagues.
Workers aged 21-24 will receive a minimum of £7.05, 18-20 year-olds a minimum of £5.60 and under 18s £4.05 an hour.
Apprentices can be paid as little as £3.50 an hour.
Don’t get it wrong
The national limits are legally binding and no employer should be paying their employees less than the National Living Wage.
If they do, they could be subject to enforcement action from Revenue and Customs.
Any inadvertent underpayments will result in the employer having to pay staff the shortfall. HMRC will also impose statutory penalties of up to £20,000 per employee underpaid, and the employer will be named in the press as being a non-compliant employer.
Please note: Those who are self-employed, voluntary workers, company directors and family members who live in the home of the employer and do household chores do not qualify for National Minimum Wage or National Living Wage.
If you want help finding out whether you are complying with the National Minimum Wage use the calculator on the HMRC website.
If you want to talk to us about employee wages and managing wages, give us a call today.