National Minimum Wage FAQ

Yes, It’s that time of the year again! As of the 1st April, the National Minimum Wage (NMW) increased. It is an issue that raises much debate and controversy; whether it’s that small businesses can’t afford the increases; that people can’t afford to live on these rates of pay; or whether there should be a different rate to reflect the cost of living in the capital.   To help you navigate your way through this NMW, here is our FAQ guide:

National Minimum Wage, National Living Wage and The Living Wage, whats the difference?

-        National Minimum Wage: The statutory wage rates that are dependent on the workers age and updated annually – you have to comply with these.

-        National Living Wage: Introduced from the 1st April 2016 as an extension to the NMW for those aged 25 and over – you have to comply with this.

-        The Living Wage: The Living Wage is set independently by the Living Wage Foundation and is a voluntary scheme calculated based of the basic cost of living within an area of the UK (http://www.livingwage.org.uk/what-is-the-living-wage).  You may choose to comply with this.

Are interns entitled to the NMW?

It depends on what the business is asking the intern to do as this defines how the law treats the individual. Assuming they have reached school-leaving age (16), if the intern is being asked to perform duties and carry out work personally, then they may  be seen as “worker” and eligible for NMW. Generally, it is ony where the intern is there to shadow or observe the work being carried out does this view change and allows it to be performed unpaid.

Are students entitled to the NMW?

If an individual is attending further or higher education then they do not qualify for the NMW as long as work does not exceed one year and is a requirement of the education course.

Can someone opt out of the NMW?

In the event that someone voluntarily agrees to waive payment in exchange for the opportunity to work for you, this agreement would be invalid – sorry!

Can I include tips, gratuities, cover charges or benefits in kind to make up NMW?

Only basic pay is considered in relation to the NMW. Anything passed on from customers in addition must be paid in addition, in line with your company rules. Benefits in kind i.e. PMI, meals, travel costs, do not count towards the NMW either. The only exception to this rule is when accommodation is provided.

What are the Consequences of paying less than NMW?

Not only will you be required to pay the underpayment arrears to the workers in question but also a financial payment to the government. This penalty equates to 200% of the underpayment, with a minimum of £100 and a maximum of £20,000. There is also a scheme in place to publicly name and shame employers who fail to meet their obligations, so this is best to avoid.

Whats next?

If you have any other questions, concerns or want help reviewing your existing pay & benefit structures, we want to hear from you.  You can also find details of the new rates here https://www.gov.uk/national-minimum-wage-rates