Workers across the country will soon see the benefits of an increased National Living Wage (NLW) from 1 April 2020. Younger workers who receive the National Minimum Wage (NMW) are also seeing boosts. This is in line with the Government’s commitment to raising the NLW to £10.50 per hour by 2024.

What are the changes to the National Minimum Wage?

The rates of pay will rise across all age groups from 1 April 2020, the changes are:

  • £8.21 to £8.72 for over 25-year old’s
  • £7.70 to £8.20 for 21-24-year old’s
  • £6.15 to £6.45 for 18-20-year old’s
  • £4.35 to £4.55 for under 18s
  • £3.90 to £4.15 for apprentices

What is the National Living and National Minimum Wages?

The compulsory NLW is the national wage rate that has been set for workers 25 or older and has been around since 1999. Mostly, those that are covered by the NMW and are 25 or older will be covered by the NLW. Including:

  • Employees
  • Most workers and agency workers
  • Casual labourers
  • Agricultural workers
  • Apprentices who are aged 25 and over

How is the NMW calculated?

Payments that must be included in the NMW are:

  • income tax and NICs
  • wage advances or loans and repayments
  • repayment of overpaid wages
  • items that the worker has paid for, but which are not needed for the job or paid for voluntarily, such as meals
  • accommodation provided by an employer above the offset rate (£7.55 a day or £52.85 a week)
  • penalty charges for a worker’s misconduct

Payments that should not be included when the NMW is calculated:

  • payments that should not be included for the employer’s own use or benefit, for example if the employer has paid for travel to work
  • items that the worker has bought for the job and has not been refunded for, such as tools, uniform, safety equipment
  • tips, service charges and cover charges
  • extra pay for working unsocial hours on a shift

Are some people not entitled to the NMW?

Yes, there are several workers who are not entitled to the NMW which include:

  • Self-employed people
  • Volunteers
  • Company directors
  • Family members, or people who live in the family home of the employer who undertake household tasks

Pieceworkers, agency workers, commission workers, part-time workers and casual workers must receive at least the NMW.

What are the deadlines?

You have until 31 January 2021 to make changes to your 2018/29 tax return, otherwise you will have to contact HMRC. In the letter, you will need to say which tax year you are amending and explain why you think you have paid too much or too little and give amounts.

You have four years from the end of the tax year to claim a refund if you have overpaid.

How can I stay compliant with NLW and NMW obligations?

Regular checks to ensure compliance with NLW/NMW obligations are important, ensure that the following are regularly checked:

  • Who is eligible for either entitlement?
  • Take payroll action when relevant
  • Let employees know about any pay rates
  • Check that staff under 25 are earning at least the right rate of NMW (check above)

The penalty for not paying the NLW can be up to 200% of the amount owed if the outstanding balance is not paid within 14 days, up to a maximum of £20,000 per worker.

Please make sure that you act now and ensure that your business is ready to deal with the increased rates on 1 April 2020.

If you found this useful, please share it using the icons at the side of the page, or leave a comment below.

Any questions?

If you’d like a meeting or a Skype call to discuss this, please get in touch with your favourite Liverpool accountant