Confusing times for the National Minimum Wage?

Legal, Resources

The National Minimum Wage (NMW) which must be paid to all workers, has hit the news headlines again in April. For full details of the NMW read our article here.

At the beginning of April 2013 the Government told the Low Pay Commission, which sets the minimum wage rate, that it must formally consider the NMW’s impact on ‘employment and the economy’ before agreeing future increases. The Low Pay Commission (LPC) was established as an independent body as a result of the National Minimum Wage act 1998.

Increases to the NMW are usually announced in March each year by the Low Pay Commission, after negotiations with Employers, Trade Unions and the Government.

The LPC will have new terms of reference written to reflect these changes, which raises the chance that the NMW will get cut or frozen for everyone if the country’s economic uncertainty continues. The Government believes that the Commission have not paid enough attention to the effect that successive rises to the NMW have had on the economy.

The NMW rates increased to £6.08 to £6.19 per hour for those aged over 21 in October 2012, but the hourly rate for those aged 16-17 and 18-20 was frozen at £3.68 and £4.98 respectively (and has not increased since October 2011).

However, the Government announced 2 weeks later that the NMW would rise by 1.9% this October.  So the new rates from 1st October 2013 will be:

  • From £6.19 to £6.31 per hour for those aged 21 and over
  • From £4.98 to £5.03 for those aged 18-20 years
  • From £3.68 to £3.72 an hour for those aged 16-17 year
  • The apprentice rate will rise from £2.65 to £2.68 (payable to apprentices under 19, or those aged 19 or over in the first year of their apprenticeship).  For more details about apprenticeship contracts see our Guide here.

In other news about the NMW this month HMRC, who investigate breaches of minimum wage complaints, found that a quarter of complaints involved apprentices.

Vince Cable, the Business Secretary, is concerned about ‘evidence that a significant number of employers are not paying apprentices the relevant minimum wage rate’.  A report from the Low Pay Commission found that 27% of apprentices were underpaid (up from 24% last year) – 42% of 18-20 year old apprentices were paid less than their legal minimum entitlement.

HMRC said:

“Where an employer is found to have abused the minimum wage rules, they are required to pay back the arrears of wages back at current rates and a financial penalty. Where the failure to pay is deliberate, employers risk being named and could be prosecuted”

Have a question about the NMW? Ask us here!

If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to us at The HR Kiosk (click here) - a Human Resources Consultancy for small businesses – you can retain us for as much time as you need.

Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.

Photo by Tomi Tapio