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Posted 23 September 2016
by Stephen Jennings

Increase to the National Minimum Wage



Earlier this year the government announced plans to increase the National Minimum Wage (NMW) and accommodation offset limit from 1 October 2016.

National Minimum Wage

The following hourly rates of NMW will apply from 1 October 2016:

  • The standard adult rate for workers aged 21 to 24 increases from £6.70 to £6.95
  • The development rate for workers aged 18 to 20 increases from £5.30 to £5.55
  • The young workers rate for non-apprentices aged under 18 but above compulsory school age increases from £3.87 to £4.00
  • The apprenticeship rate for apprentices aged under 19 and those aged 19 and over who are in the first year of their apprenticeship increases from £3.30 to £3.40.

The National Living Wage (NLW) introduced in April 2016 to workers aged 25 and over will not change on 1 October 2016 and will remain at £7.20 per hour.

Accommodation offset limit

The maximum daily accommodation offset limit also increases on 1 October 2016 from £5.35 to £6.00. This means that from 1 October 2016 the value of any accommodation supplied should not exceed £42.00 per week, increasing from £37.45.

What you need to do

It is important to ensure that you are paying your staff at least the NMW or NLW. There may be some members of staff who are affected by the NMW increase. If this is the case, we recommend taking the following steps:

  • Take the relevant payroll action
  • Write to all affected employees to inform them of their new rate of pay
  • Diarise the birthdays of your employees aged under 25 and note when their rate of pay will increase
  • Review pension contributions which may need to be updated (typically calculated as a proportion of basic pay)
  • Review the affected employees to see whether they will now fall within the scope of pension automatic enrolment, maternity pay etc.
  • Review those employees with childcare vouchers as they may now be under the minimum/national living wage (salary sacrifice reduces the amount of pay which counts for minimum wage purposes)
  • Manage the expectations of other staff who consider they should also be entitled to a pay increase

What next?

The government has announced that the NMW and NLW will increase again from 31 March 2017 so it is important that you keep up to date with the proposed rates and ensure that you are ready for the increase when it is implemented next year.

Further information

For further advice, contact our specialist employment team on 01392 207020 or e-mail employment@tozers.co.uk.

 

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About the author

Stephen Jennings

Partner

Partner in the litigation department specialising in employment law, he is the relationship manager for many of the firm's employment clients