Employment Law

Living & Minimum Wage

As a business owner, it is very important to know what you should be paying your employees.

The government has introduced numerous laws regarding this in order to protect employees and help better guide you as to what you should be paying your workers. The government takes wage law very seriously, and there it is necessary for you as a business owner to learn the differences between the various classifications – these being the National Minimum Wage, the National Living Wage and the Living Wage.

It is important to know these differences as heavy penalties can be issued if you are found to not be paying your employees the correct salary. Whilst most such penalties are fines, punishment can also include business restrictions, including not being able to serve as a Company Director for a set number of years. To help you get a clearer idea as to what each of these different wages are and what their differences may mean for your business, we have put together the following information:

The National Minimum Wage

The UK National Minimum Wage is dependent on two factors; the person’s age and whether they will be employed as an apprenticeship. This wage is set every year by the government and is created in close conjunction with the Low Pay Commission – an independent UK body that serves to monitor the ever-changing cost of living in the UK so to ensure that salaries remain fair and are a true reflection of what workers in the UK need. The National Minimum Wage must be provided to every person over school-leaving age – regardless of what position they take in your company, as well as what hours they work – be it part-time or full-time. Whilst this wage is set every year, and must be met, there are some exceptions to the rule that you must be aware. These exceptions include the following:

• People considered Self-Employed
• Company Directors
• Work that is carried out voluntarily
• Employee family members that work for the company and still live with the employee

The National Minimum Wage from April 2019 will be as follows:

The hourly rate for apprentices applies to everyone aged 19 and under, as well as those aged over 19 who are in the first year of an official apprenticeship. Apprentices must be paid for the time they spend both working and training. Once they have ended their apprenticeship, these employees must then be paid the minimum wage for their age.

The National Living Wage

The National Living Wage came into effect in 2016 and applies everyone over the age of 25-years (unless that person is in the first year of an apprenticeship). This means that anyone qualifying for this must be paid a minimum of £7.83 an hour.

The Living Wage

Different to the National Living Wage, the Living Wage is an hourly wage that has been calculated on the basic cost of living in the UK. The Living Wage is calculated by an independent organisation and is therefore not legally-enforced by the government. The current Living Wage is set as £8.75 per hour for outside of London, and £10.20 for those working in London. As you can see, this rate is higher than the National Living Wage and is considered a much more realistic approximation of what a person needs to earn in order to cover the costs of living, such as rent, utilities and food. The reasons behind paying employees the Living Wage are multiple, including improving employee retention and enhancing your company’s image and productivity.

Failure to pay the correct wage

It is illegal to not pay your employees at least the National Minimum Wage or National Legal Wage – depending on their age. This also includes being found to be falsifying financial records to pretend that you are paying the legal wage when you are not. The penalties for failing to pay these wages are high and can include a £20,000 fine applicable to every worker found to have been paid less, as well as the possibility of being banned from serving a Company Director for up to period of 15-years. The Living Wage is only a recommendation, and therefore does not need to be adhered to from a legal perspective, but rather is intended to serve as a guideline for businesses wanting to ensure their employees’ standard of life is of a more acceptable level.

Pay what you can

These salaries have been set by the government to protect workers from being underpaid and exploited. And whilst, as a business owner, you will be required to pay at least the minimum levels, it does not mean you cannot pay more. Salaries that accurately reflect the duties and amount of work expected of an employee will serve to create a working environment that your employees enjoy and are committed to, improving employee retention and in turn helping to improve the long-term stability of your company.

Good luck!

Remember, having employees is a big commitment in a lot of ways, and there are many things you need to consider, both before hiring someone and then continuously afterwards whilst they remain employed by you. By providing a fair salary and a good working environment, you are more likely to retain good employees, and as a consequence, help your business continue to grow.