What is the minimum wage?
The National Minimum Wage (NMW) is the minimum hourly rate that must by law be paid to all workers and employees in the UK between the school leaving age (usually 16) up to the age of 21.
The minimum wage increases every April. The minimum wage rates as of 1 April 2024 are:
-
for those aged 18 to 20 - £8.60
-
for under 18s - £6.40
-
for apprentices - £6.40. This applies to apprentices who are:
-
aged under 19, or
-
aged 19 or over and are in the first year of their apprenticeship
-
All employers, irrespective of size, are required to pay the NMW to those who are eligible.
What is the National Living Wage?
The National Living Wage (NLW) is the minimum hourly rate that must be paid to workers and employees who are aged 21 or over. Although it’s technically called the National Living Wage, it’s often referred to as the ‘minimum wage’. Until 1 April 2024, only those aged 23 and above were eligible for the NLW.
From 1 April 2024, the new NLW rate is £11.44 per hour.
As with the NMW, all employers must pay the NLW or a higher rate as a legal obligation - this is not negotiable. The NLW rate is reviewed annually, with changes generally coming into effect at the start of April.
What is the recommended living wage?
The Living Wage Foundation has been recommending its own version of a ‘living wage since before the NLW came into effect. It’s known as the ‘real Living Wage’ and is an independently calculated hourly rate reflecting the actual cost of living. It is higher than the NLW and, although many employers choose to adopt it, there is no legal obligation to pay these rates. As of 1 April 2024, the living wage as recommended by the foundation is £13.15 per hour in London and £12.00 per hour outside London.
What are the penalties for not paying the correct wage?
It can be a criminal offence for employers to not pay someone the NMW or NLW when they’re eligible for it, or to fake payment records.
Employers who fail to pay the correct NMW or NLW:
-
have to make up any shortfalls, and
-
may be issued with a Notice of Underpayment by HMRC, which requires them to pay a penalty of up to £20,000 regarding each affected worker or employee
Businesses that flout minimum wage regulations can also be ‘named and shamed’ by the Department for Business and Trade (DBT).
Do freelance workers need to be paid the minimum wage?
As a general rule, freelancers who are genuinely self-employed are not covered by the NMW or NLW rules. However, it is important to establish somebody’s employment status before neglecting to pay them minimum wage, to ensure that they would not be legally considered workers or employees (and therefore entitled to NMW or NLW). Determining whether somebody is self-employed or a worker can be difficult and depends on various factors, such as the degree of control someone has over their work.
For more information, read Consultants, workers and employees and Gig economy workers.
Can I include tips when calculating minimum wage?
Tips and other gratuities (eg services charges) cannot be used to count towards NMW or NLW. These payments should not be taken into account by employers when calculating NMW or NLW payments.
For more information, read Tips, tronc and service charges.
Do zero hours workers need to be paid the national minimum wage?
Anyone working under a Zero hours contract will be classed as either an employee or worker and, as such, will be entitled to the NMW or NLW.
Are there any circumstances where an employer doesn’t have to pay minimum wage?
Businesses are not required to pay the minimum wage to consultants, freelancers or contractors who are genuinely self-employed.
Certain other categories other people are also not automatically entitled to the NMW or NLW, including:
-
higher and further education students on work placements lasting up to one year
-
children below the school leaving age (although other restrictions apply in respect of child workers)
For a full list of categories of people not entitled to the minimum wage rates, see the government’s guidance on the minimum wage.
