Minimum wage rises - April 22nd 2024

National minimum wage rates increased on 1 April 2024 and some employers could get caught out.

At the same time as the increases, the age at which an employee has to be paid the top hourly rate of £11.44, known as the national living wage, was reduced from 23 to 21. The rate for employees aged 18 to 20 is now £8.60 and under 18s have to be paid at least £6.40. The average increase over last year’s rates is 16%.

At first sight, making sure you pay workers at least the minimum wage looks straightforward, but there are many complexities – so much so that the government recently named over 500 employers that have failed to pay the right amounts. They include several household names. Those companies have had to make good the shortfall to their staff and have faced penalties of up to 200% of their underpayment.

The underpayments are often not deliberate but arise from mistakes in calculating pay, for example where there are deductions from pay for such things as uniforms, or where working hours are incorrectly recorded. Salary sacrifice arrangements, attractive for their national insurance savings, may also lead to a breach.

Common causes of minimum wage underpayments include:

• Deductions from pay for items connected with the job, such as uniforms, registration or licence fees, transport and meals. However, many other deductions from pay, for example trade union subscriptions and contractual payments resulting from a worker’s conduct such as for breakages, do not reduce pay for minimum wage purposes.
• Failure to pay for periods when a worker is required to be at the workplace but no work is done, or during handovers or while going through security checks.
• Failing to pay for time spent travelling on business, for example between clients, although home to work travel time does not count.
• Not paying the right rate when a worker moves up an age band. This year’s age change for the top band needs particular care.
• Failing to pay the minimum wage to all workers entitled to it such as interns.
• Paying the apprentice rate when the worker does not meet the definition of an apprentice or is over 19 and has completed their first year of apprenticeship.

Remember also that not all remuneration counts towards pay for minimum wage purposes. Some items that are excluded are tips, benefits in kind, pension contributions, share options and premium payments for overtime worked by staff who are paid according to hours worked.