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Understanding the UK’s Minimum Pay Scales

Updated May 2017

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The National Living Wage is frequently in the news, with even large and reputable companies under the spotlight for not having kept up with regulations and incurring fines for underpaying some staff.

This has highlighted how important it is for companies of every size to understand their obligations and comply with the regulations.

The UK has two compulsory minimum pay scales in place, governed by two different sets of regulation:

  • National Living Wage (NLW) regulations were passed through parliament in 2016 with the goal of ensuring that all over-25s will be paid at least £9 per hour by 2020.
  • National Minimum Wage (NMW) regulations have been in force since 1999 and apply to employees under 25 and are still governed by the original National Minimum Wage regulations.

Rates for both the National Living Wage and National Minimum Wage are reviewed annually by the Low Pay Commission and went up in April 2017:

  • £7.50 per hour (currently £7.20) – 25 yrs old and over
  • £7.05 per hour (currently £6.95) – 21-24 yrs old
  • £5.60 per hour (currently £5.55) – 18-20 yrs old
  • £4.05 per hour (currently £4.00) – 16-17 yrs old
  • £3.50 for apprentices under 19 or 19 or over who are in the first year of apprenticeship (currently £3.40).

In 2018, the National Living Wage will increase to £8.05 per hour and rise to £8.50 per hour by 2019. Increases in the National Minimum Wage are expected to be more gradual.

Penalties for employers who flout the regulations are punitive. If an employee can prove that they have not been paid correctly, HMRC can issue a fine and insist that employers pay any arrears. If these monies are still unpaid, the employment tribunal could impose fines of up to £20,000. To understand your obligations as an employer, visit the ACAS website.

Voluntary ‘Living Wage’ Scheme

To complicate matters further, there is also a voluntary scheme known as the ‘Living Wage’, run by the charity the Living Wage Foundation, which aims to set a recommended minimum pay-scale based on the cost of living. The Living Wage (also sometimes referred to as ‘the real Living Wage’) is independently calculated each year and is currently £8.45 per hour (£9.75 in London) for all employees over 18.

There are currently around 3,000 accredited employers who support this scheme including very large employers, such as Google or Burberry, through to small, independent businesses.  The charity says that by choosing to opt in to the voluntary Living Wage, organisations are more likely to attract the best staff.

As a reputable consultancy with some 20 years experience, we understand the nature of the local job market, which means we can offer you guidance on the optimum hourly pay rates and salaries to attract the best candidates.

For more information about setting appropriate pay rates, contact Tracy Welch at Priority Appointments on 01256 334575 or email us.

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