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Guide to the National Minimum Wage 2022

National Minimum Wage UK | Employment Law | HR Solutions

What is the National Minimum Wage?

The National Minimum Wage Act 1998 was introduced to create a statutory minimum hourly wage rate for employees and workers. The National Minimum Wage (NMW) framework includes different pay levels depending upon a person’s age.

When first introduced back in April 1999, the pay bands within the NMW were broken down for those of the age of 22 years and above, youth development group which included those aged between 18 and 21 years, and an age rate of 16-17 years of age.

Since then, we have seen further age categories added and the boundaries of the categories also change.

What is the difference between the National Minimum Wage and the National Living Wage?

The NMW is different to the National Living Wage (NLW). The NLW which was introduced later in 2016 and again, as part of an amendment to the National Minimum Wage Act of 1998, introduced a new age category.

It required a certain pay rate to be given to all those who were 25 years and above. Consequently, other age groups as set out within the legislation also changed.

Over time, we have seen may changes to the minimum statutory pay rates and currently, we have the following minimum payments in place:

National Living Wage | 23 years and above | £9.50

National Minimum Wage | Everyone aged 21 – 22 years | £9.18

Development Rate | Everyone aged 18-20 years | £6.83

Rate for young workers | Everyone aged 16–17-year-olds, excluding those of compulsory school age | £4.81

Apprentice Rate | Apprentices under the age of 19 years old or is aged 19 or above and in their first 12 months of an apprenticeship | £4.81

Who gets the National Minimum Wage?

Most employees and workers are eligible for the minimum wages, so this includes agency workers, and those on zero hours or casual agreements. They must work in the UK under a contract and no longer be of compulsory school age.

Who is entitled to minimum wage?

All workers of at least school leaving age are covered by minimum wage legislation. This includes workers who are not self-employed. Businesses must pay the minimum wage rate to:

  • Part-time workers
  • Homeworkers
  • Casual labourers
  • Agricultural workers
  • Disabled workers
  • Apprentices, trainees and those in their probation period
  • Workers from outside the UK
  • Seafarers and British offshore workers temporally working outside the UK

The government provides detailed guidance to help employers calculate the hourly rate of pay under the National Minimum Wage. The guidance outlines what payments should be included and excluded, the reference period for averaging pay, what happens with accommodation and benefits in kind and the hours for which the minimum wage must be paid.

What is the real Living Wage?

In addition to the NMW and NLW, there is also the real Living Wage. It was created by the Living Wage Foundation, a foundation that recognises that wages should reflect everyday needs. It differs from the NMW and NLW because it is a voluntary scheme that an employer can subscribe to, whereas the NMW and NLW is the legal minimum in which all employers must pay.

Penalties for not paying the National Minimum Wage

HM Revenue & Customs (HMRC) is the main enforcement agency who have extensive powers to investigate, inspect and enforce if an employer is believed to not be paying the National Minimum Wage or falsifies records. Doing so is a criminal offence and carries a maximum fine of £20,000 per employee.

Employers can also be banned from being a company director for up to 15 years. The employer will have to pay in arrears which will be due within 14 days and the maximum figure is based on 100% of the unpaid wages. Penalties can be calculated online using the government’s calculator.

The penalty is calculated as 50% of the total underpayment for all workers not paid the required amount during the reference period.

What to do if your employer fails to pay the minimum wage

If you believe that you are not paid the correct National Minimum Wage you should first try to resolve the issue with your employer. Sometimes an informal meeting can be the easiest way to resolve the matter.

However, if you cannot resolve the issue informally, then you are entitled to make a formal complaint or take things further by complaining to the HMRC. Your initial complaint to the HMRC can be anonymous if you wish.

HMRC has the power to investigate minimum wage complaints and issue a notice of arrears for any money owed to you. The HMRC can also fine employers and take them to court if they refuse to pay.

Payroll support for businesses

If you would like support with your Payroll, call HR Solutions on 0844 3245840 or visit our dedicated Payroll page for more information.

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