New national minimum wage rates from 1 October

New hourly national minimum wage (NMW) rates come into effect on 1 October 2016.

Employers are already legally required to pay eligible workers who are 25 or over the national living wage (NLW) of £7.20 an hour.

Hourly NMW and NLW rates

Age From October 2016 Until October 2016
25 and over £7.20 £7.20
21-24 £6.95 £6.70
18-20 £5.55 £5.30
16-17 £4.00 £3.87
Apprentices* £3.40 £3.30

*Apprentices aged 16-18 and those aged 19 or over who are in their first year.

Calculating NMW and NLW

Working time includes:

  • time at work and being required to work or being on standby near the workplace
  • work-related travel (but not travelling between home and work)
  • training or travelling to training.

The following payments should not affect NMW or NLW calculations:

  • income tax and national insurance contributions
  • advances on wages or loans
  • repaying wage advances or loans
  • repaying overpaid wages
  • some accommodation
  • penalties related to worker misconduct
  • anything the worker paid for voluntarily or are not needed to do their job such as meals.

Items a worker buys for a job but isn’t refunded for (such as uniform or equipment) should not be included as part of the minimum wage.

Employers who find out they’ve paid below the correct wage should pay any arrears straightaway. If HMRC discovers any errors, the employer will have to pay a fine and may be named by the government.

Employers need to keep proof that they have met their wage obligations (such as a payroll record) for 3 years.

Get in touch if you would help and advice regarding pay and payroll.