This website uses cookies

We use cookies to improve your experience. Find out more about our Cookie Policy.

Close

How will the changes to national minimum wage affect you?

How will the changes to national minimum wage affect you?

In this article you’ll learn

  • When the national minimum wage will be changing
  • How this will impact you as an employer
  • Why it’s important to make the changes to wages

Finance is always a hot topic in business and it’s best to keep up to date on all the latest regulations that apply to it. The most current change that will affect your business is the increase on the national minimum wage. The national minimum wage is simply the minimum that you must pay your employees and it is a legal obligation. The amount you pay will depend on your worker’s age and if they are an apprentice.

The rate will change April 2017 and then every April afterwards. The rates from 1 April 2017 will be:

  • £7.50 per hour - 25 yrs old and over
  • £7.05 per hour - 21-24 yrs old
  • £5.60 per hour - 18-20 yrs old
  • £4.05 per hour - 16-17 yrs old
  • £3.50 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.

This new pay rate only affects someone’s pay from the first full pay reference period after that date. If you’re uncertain, there’s more information on gov.uk and the ACAS website.

Who is exempt from national minimum wage?

There are a few situations when employees are not entitled to national minimum wage and this includes if they’re self-employed people, volunteers or company directors. There is also family member exemption, which means:

  • Workers must either be a member of your family and reside in your family home and share in the tasks and activities of the family
  • The worker resides in your family home and is not a member of your family, but is treated as such (e.g. shares living accommodation, meals and leisure activities), and does not make payments to you for this, and if the work had been done by your family, it would not be treated as work

Pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers must receive at least the national minimum wage.

National Minimum Wage

What will happen if you don’t pay the correct amount?

You can use gov.uk to see if you’re paying the correct minimum wage and if you owe your employee any payments from the previous years. It’s illegal to pay the incorrect amount and you definitely want to stay on the right side of the law.

Your employees may make a formal complaint if they believe you haven’t fulfilled the minimum wage, and you should try to resolve the issue quickly by paying back the money you owe them. If you still don’t pay the correct amount, your employee may take the matter further to HMRC. This will lead to an investigation and you could be sent a notice of arrears plus a penalty for not paying the correct amount. Worst case, you may even have to go to court.

It’s not worth risking extra costs or creating a bad reputation for your business by not conforming to the laws about minimum wage. The penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days. Maximum fine for non-payment will be £20,000 per worker. If you don’t repay these, you will be banned from being a company director for up to 15 years.

 Call to Action to download the health and wellbeing eBook

Summary

In April 2017, the national minimum wage will be raised, so it’s important to be aware that you may need to increase your employees’ wages. This article explains the legal impact if you don’t fulfil the minimum wage and what the new prices are.