Posted on: 24 February 2020

The laws about pay for your team

With the minimum wage set to rise in April 2020, we are taking a look at changes to the levels of pay that you will need to start giving to your employees.

Take a look at the guidance below so you can make suitable changes to your business to ensure that you are compliant with the law.

Minimum wage and living wage

In the UK, it is the law that you pay your staff the appropriate minimum wage unless they meet some of the criteria which we will outline later on.

The living wage was introduced in 2001 in an attempt to address the issues of working poverty. Employers can choose whether or not they want to pay all their staff this rate or not as the living wage is only compulsory for employees who are at least 25 years old.

The minimum wage will be increased in April 2020, but here are the rates as they stand before the April 2020 increase:

  • Under 18s - £4.35
  • 18-20 - £6.15
  • 21-24 - £7.70

When the new minimum wage is introduced in April 2020, the new rates will be:

  • Under 18s - £4.55
  • 18-20 - £6.45
  • 21-24 - £8.20

In 2020, the living wage for over 25s will rise from £8.21 to £8.72.

Who is entitled to the minimum or living wage?

A worker is entitled to the minimum or living wage if they:

  • Have a contract of employment to perform work or provide services for their employer
  • Are not self-employed
  • Are of school leaving age

This applies whether or not these employees are part-time, casual, or agency workers.

School leaving age is defined differently in different parts of the UK.

England

The person is of school leaving age if they are 16 by the end of the school summer holidays, however, until the person turns 18, they must be in full-time education, employment or training.

Scotland

The person is of school leaving age if they turn 16 between 1st March and 30th September of the same year. Individuals who turn 16 between 1st October and the last day of February can leave at the start of the Christmas holidays in the same school year.

Northern Ireland

A person will be of school leaving age after 30th June if they turn 16 between 1st September and 1st July, otherwise, a person will be of school leaving age on 30th June the following year.

Wales

The person is of school leaving age in June if their 16th birthday occurs by the end of that school year’s summer holidays

Apprenticeship wages

Apprentices are often paid less than a member of full-time staff, but wages must meet the minimum wage for apprentices.

The 2019 minimum wage is £3.90 and will rise to £4.15 in 2020.

All apprentices under 19 will have received the apprenticeship minimum wage, however, apprentices over the age of 19 will receive the apprentice wage for the first year of their apprenticeship, followed by the appropriate minimum wage for their age group.

Exceptions to the minimum or living wage

You will not be eligible for the minimum wage or living wage if you fall into one of the following employment statuses:

  • Self-employed
  • Company directors
  • Volunteers
  • Workers on a government employment programme, such as the work programme
  • Members of the armed forces
  • A family member of the employer living in the employer’s home
  • Non-family member living in the employer’s home, e.g. au pair
  • Workers under the school leaving age
  • Higher education or further education students on work placement for up to a year
  • Workers on a government pre-apprenticeship scheme
  • Workers on an EU programme, e.g. Leonardo da Vinci or Erasmus projects
  • JobCentre Plus trial workers
  • Share fishermen or fisherwomen
  • Prisoners
  • Workers in a religious community, e.g. monastery or nunnery

Fines

If you do not pay your employees the correct amount, they can anonymously report you to HMRC.

If it is found by HMRC that you have not been paying the minimum wage or living wage, depending on the age group, you can be issued with a notice of arrears plus a penalty fine.

HMRC can also take employers to court for not paying minimum or living wage, where a fine of £20,000 per each employee not paid correctly can be administered. If this fine is not paid, employers can be named publicly and banned from being appointed as a company director for up to 15 years.

Business insurance with Premierline

If you employ somebody to work at your business, in most cases you will need Employers’ Liability (EL) Insurance. EL insurance protects you in the event that an employee claims against you for an injury in the workplace.

At Premierline, our trained business insurance experts have a wealth of experience in arranging EL insurance for business around the UK. If you have an Employers’ Liability need, get in touch to speak to one of our insurance advisors.

Source: Zywave inc. – Employment Law Summary: National Minimum and Living Wage Laws

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The information and tools contained in this guide are of a general informational nature and should not be relied upon as being suitable for any specific set of circumstances. We have used reasonable endeavours to ensure the accuracy and completeness of the contents but the information and tools do not constitute professional advice and must not be relied upon as such. To the extent permitted by law, we do not accept responsibility for any loss which may arise from reliance on the information or tools in our Insight Hub.