Legal 101

UK Wages Explained

Catherine BoxallCatherine Boxall
Last updated on:
February 3, 2022
Published on:
November 9, 2021

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All employers are required to pay employees minimum wage, irrespective of their size, assets or income. When talking about minimum wage, we are talking about the minimum income a worker should receive. In this article, we will outline National Minimum Wage, National Living Wage and the Real Living Wage within the UK and show you how platforms such as Legislate can help you keep track and ahead of wage changes.

What is the National Minimum Wage?

The National Minimum Wage (NMW) is the minimum pay per hour workers are entitled to, depending on their age and on the nature of their employment. A ‘worker’ must be of school leaving age to be in receipt of NMW. In England and Wales, this will be on the last Friday of June if the person will turn 16 before September. In Scotland, one can leave school after 31st May if they turned 16 between 1 March and 30 September of that year. In Northern Ireland, if one turns 16 between 1 September and 1 July (a school year) they can leave school after 30 June. However, if one turns 16 outside of these months in Northern Ireland they cannot leave school until 30 June the following year.

Are National Living Wage Rates the same as National Minimum Wage Rates?

Wage rates are decided in the Government’s ‘Budgets’. In the Summer Budget 2015, the Conservative Government introduced the National Living Wage (NLW), taking effect in April 2016. In April 2021, entitlement to the NLW was lowered to 23.

This means that 23 year old workers and above should be in receipt of the NLW, which is an £8.91 hourly rate. Workers under this rate should be in receipt of the NMW, which varies depending on age groups:  

  • For workers aged 21-22 they should receive £8.36 per hour;
  • For workers aged 18-20 they should receive £6.56 per hour;
  • For workers aged 16-17 they should receive £4.62 per hour, and;
  • For workers acting under the ‘apprentice rate', they should receive £4.30 per hour.

On 28th October 2021, Rishi Sunak (Conservative Chancellor) announced an increase to the NLW from £8.91 to £9.50, taking effect from April 2022. He also suggested that from 2024, the NLW eligibility will be reduced again to apply workers aged 21 and over.

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

The NLW is not to be confused with the ‘Real Living Wage’ which is a wage rate that is voluntarily paid by almost 9,000 UK businesses. The Real Living Wage is not a minimum threshold like NMW or NLW but a wage rate that is based on what people actually need to live on. The Living Wage Foundation, responsible for calculating the Real Living Wage, consider that for 2020/21, the Real Living Wage in London was £10.85 per hour and £9.50 across the rest of England.

When should you expect the minimum wage?

Provided you are of the age whether you are entitled to NMW or NLW the same rules apply about whether you should expect minimum wage. Any contract that does not afford the worker this basic level of payment is not legally binding: the worker is still entitled to the receive minimum wage. A worker is entitled to minimum wage even if they are not full time employees (save in the instances outlined below) meaning that those in part time work, acting as casual labourers or agency workers, trainees and those in probationary periods, for example, are entitled to the minimum.

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When is someone not entitled to the National Minimum wage?

Some people are not entitled to the minimum wage. These people include those that are self-employed, volunteers, company directors, members of the armed forces, prisoners, people on work experience and students in higher and further education on work placements of up to one year. Apprentices are also not necessarily entitled to minimum wage. Apprentices are entitled to the apprentice rate if they are under 19 or, regardless of their age, are in the first year of their apprenticeship. Once an apprentice is over 19 and has completed their first year, they will be entitled to the correct minimum wage depending on their age.

Do employers have to keep records of worker pay?

Employers should keep records to prove that they are adequately paying their workers and must keep these records for at least 6 years if they were created on or after 1 April 2021 or if they still had to be kept on 31 March 2021 under the previous rules that records must be kept for 3 years. Records do not have to be in any particular form but most use their payroll records as proof of pay and hours worked.

What happens if an employer doesn't pay minimum wage?

It is a criminal offence to not pay workers the NMW or NLW. If workers are not paid adequately, employers should pay any arrears immediately. HMRC has the right to carry checks at any time on employers and if an employer is discovered to be underpaying their workers, they will be fined and may be named by the government.

How can Legislate help?

Legislate is a legal technology startup which allows large landlords, letting agents and small businesses to easily create, sign and manage contracts that are prudent and fair. Legislate’s platform is built on its patented knowledge graph which streamlines the contracting process and aggregates contract statistics to quickly unlock valuable insights.

By completing your employment, consultancy and intern contracts on Legislate you will be able to easily manage the effect of changing pay rates by certain percentages or for certain employees on your overall payroll.

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