The National Minimum Wage: what employers need to know

Business owners should ensure they are not unwittingly breaching employment laws after the National Minimum Wage (NMW) increased this month.

As planned, the legal minimum wage has increased from £7.83 to £8.21 for workers over the age of 25 from 01 April 2019.

The increase represents the largest ever rise in the NMW, increasing a minimum wage worker’s salary by some £690 each year, or by around five per cent.

The legal minimum wage for workers under the age of 25 has also risen. This includes £7.70 per hour for 21 to 24-year olds, providing an additional £580 over the year for full-time workers, and £6.15 for 18 to 20-year olds, providing full-time workers with an additional £455 over the year.

The rise went into immediate effect from 01 April, meaning employers should ensure they have adjusted their payroll systems appropriately or risk harsh penalties.

Last year, HM Revenue & Customs (HMRC) publically ‘named and shamed’ hundreds of companies for failing to pay the minimum wage, while also issuing hundreds of thousands of pounds in penalties.

Employers who pay workers below the legal minimum wage are required to pay back arrears of wages to the worker at current minimum wage rates, as well as face financial penalties of up to 200 per cent of arrears (capped at £20,000) per worker.

The rise in the NMW forms part of a packet of measures designed to increase the wellbeing and rights of workers. As part of this, all workers, including casual and zero-hour workers, will have the right to receive a payslip from 06 April 2019.

New NMW rates and yearly comparison

Age 2019-20 (new rate) 2018-19 (previous rate)
25 and over £8.21 £7.83
21 to 24 £7.70 £7.38
18 to 20 £6.15 £5.90
Under 18 £4.35 £4.20
Apprentice £3.90 £3.70

Meanwhile, Employment Tribunal compensation limits rose at the beginning of April.

The maximum compensation for unfair dismissals is not £86,444, while the statutory redundancy payment has increased to £15,750 and the maximum allowable ‘weeks pay is now £525.