National Living Wage Update

In August this year, the government named and shamed 191 employers who had underpaid workers between 2011 and 2018. Some of those included major household names, with the likes of John Lewis being named amongst the offenders. Collectively, the companies owed £2.1 million to over 34,000 workers and were ordered to pay back what they owed. They were penalised too, being made to pay an additional £3.2 million in fines.

The issues don’t stop there, though. According to HMRC, just less than half of UK companies wrongly deducted pay from workers’ wages. The deductions were made for things like uniforms and other expenses. 30% had failed to pay overtime and 19% paid apprentices the incorrect rate.

Employers are falling short.

You’ll have seen the recent news in the budget that the minimum wage for 23 year olds is set to rise from £8.91 an hour to £9.50 an hour from April 1 2022. This rise means a full-time worker will get £1,074 extra a year before tax and just under £20,000 salary a year on a 40-hour week. There are similar increases planned for other age groups too:

  • National Minimum Wage for those aged 21-22: From £8.36 to £9.18
  • National Minimum Wage for 18 to 20-year-olds: From £6.56 to £6.83
  • National Minimum Wage for under-18s: From £4.62 to £4.81
  • The Apprentice Rate: From £4.30 to £4.81

John Lewis have previously said that the issue with pay related to pay averaging, which spreads workers’ pay evenly over the year. This meant that those on hourly rates sometimes saw their pay drop below the national minimum wage when they worked extra hours. This was technically breaking the rules.

Argos were caught ‘wage-dodging’ when they asked employees to attend briefings before their shifts and stay behind after their shifts to get their bags checked. This additional time should have been taken into account.

Tesco, another offender blamed their breach on a ‘technical issue’ which they claim took place in 2017, resulting in some workers being paid less than the national minimum wage.

The list goes on.

What’s the difference between the national minimum wage and the national living wage?

This one can cause a bit of confusion. The difference isn’t super clear. Here’s how the Government define those:

The national living wage is the minimum pay per hour almost all works are entitled to. The National Living Wage is higher than the National Minimum Wage – workers get it if they’re over 23.

The national minimum wage that is payable to an employee depends on their age and if they’re an apprentice.

So, if you’re over 23, it’s the minimum national living wage you’ll be interested in.

If you’re an employee, you can check if you’re getting paid the correct amount by clicking here:

If you’re an employer, you can check the same here:

Is there any way you can bypass the legal minimum wages as an employer?

No. Even if you get your employee to agree to accepting a lower wage than that they are legally entitled, you are still breaking the law.

Our recommendations

As an employer, it’s your responsibility to review the measures you have in place to ensure you are not paying staff less than what they are legally entitled to.

It’s important that employers don’t get caught out. Just because the hourly rate looks more than the minimum on paper, it doesn’t necessarily mean this is the case i.e., if you’re also offering pension contribution schemes etc.

Keep on top of your ‘age review’ practices. Are any employees approaching the age of 23? If so, this should trigger an automatic update on your payroll.

It’s also an employer’s responsibility to keep records proving that they are paying the national minimum wage. Under certain circumstances, these records should be kept for at least 6 years. Along with that, it is recommended that employers keep a clear log of any agreements they have with employees, including details of working hours, pay and conditions etc. If an employer thinks an employee is not entitled to the minimum wage, they must have documents that show why a worker is not entitled.

HMRC can carry out spot checks at any time and can ask to see any records.

In short, keep your practices under review and keep records. Meet with your HR team regularly (if you have one), to make sure these practices are adopted. Besides, you have no choice.

Tend Legal Limited, London