National Minimum Wage, National Living Wage and The Living Wage – What You Need to Know

Each year, the Chancellor of the Exchequer announces the minimum wage amount all employers must pay their workers. The minimum amount is paid hourly and depends on a worker’s age or if they’re an apprentice. There are two categories of minimum wage overseen by the government:

• The National Minimum Wage is the minimum pay per hour almost all workers are entitled to
• National Living Wage is higher than the National Minimum Wage and is paid to workers who are over 23 years of age.

Apprentices must be paid the apprentice rate if they’re either:

• aged under 19 years
• aged 19 years or over and in the first year of their apprenticeship.

The Living Wage Foundation also publishes a minimum ‘Living Wage’ it recommends employers should pay to workers aged 18 years and over based on the amount it calculates is needed to meet the everyday cost of living for an individual. There is no statutory basis for the recommendation and it is not overseen by the government. However, many employers pay the amount recommended by the Living Wage Foundation to help workers with the higher cost of living in certain parts of the country (such as London and other major cities).

This blog provides background to each type of minimum and living wage and the amount available to UK workers.

The National Minimum Wage and National Living Wage

The national minimum wage (NMW) is the minimum amount an employer needs to pay a worker. It must be paid to all workers aged under 23 years. The National Living Wage (NLW) is the amount which must be paid to workers aged over 23 years. A separate rate is calculated for apprentices. The rates published by HMRC from April 2023 and for the previous year are as follows:

Living Wage recommended by the Living Wage Foundation

As highlighted above, the Living Wage Foundation publishes a living wage it believes meets the cost of living needs of people across the UK.  The rate is usually higher than the minimum levels published by the government and is shown below for 2022 and 2023. Employers may decide to pay this amount – it is not enforced by the government.

Fines and penalties

As you would expect, the government will take enforcement action against any employer found to be paying workers less than the minimum wage amount. From April 2016, penalties can be anything from 100% to 200% of the amount of wages underpaid, up to a maximum of £20,000. The penalty is reduced by 50% if all of the unpaid wages and 50% of the penalty are paid within 14 days.

Exceptions

Some individuals are not entitled to any minimum wage, for instance self-employed people and company directors. Members of the armed forces and work experience students are also excluded.

How Initor Global can help you comply with the government’s minimum wage requirements

At Initor Global we have accountants and tax specialists who can meet your outsourcing needs. Our experts can prepare your clients PAYE and payroll information to ensure they comply with the government’s minimum wage legislation.

If you want to find out more about our accountancy and tax services, or arrange a free consultation, please contact us on hello@initor-global.co.uk or visit our website at initor-global.co.uk.

You can also call us on 0203 519 2121.