Navigating the minimum wage rises

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.

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. 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. Common causes 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 do not reduce pay for minimum wage purposes.
• 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.