Last reviewed 28 January 2021

The National Minimum Wage (NMW) will increase on 1 April 2021. In this article, Opeyemi Ogundeji, researcher and employment law writer at Croner-i, explores the NMW, the Government’s name and shame list and NMW exemptions in more detail.

As part of employment law provisions in the UK, all workers and employees over compulsory school age, including apprentices, are entitled to earn at least the National Minimum Wage (NMW) or the National Living Wage (NLW) for every hour worked. The rates at which these should be paid change yearly and vary depending on the individual’s age.

For example, until 1 April 2021, the NLW is payable to those aged 25 and above. Apprentices who are under the age of 19, or 19+ but in the first year of the apprenticeship are also entitled to a minimum rate specifically constructed for apprentices and once the apprentice reaches the age of 19 (or they are 19 or over and are in the apprenticeship for longer than one year) they become entitled to the NMW rate that applies to their age group.

By law, it is important that employers pay staff the correct minimum wage rates for their age groups or risk facing serious repercussions for failing to do so. The risks of failing to pay the correct minimum wage rates range from unlawful deductions from wages claims, fines from the Government, and/or being “named and shamed” as a “rogue” employer.

Employers named and shamed

After a two-year pause (to allow for an evaluation into its effectiveness to be carried out) the Government has relaunched the naming and shaming scheme, which carries more stringent penalties on offending employers. Business Minister, Paul Scully, has described the recently published list of 139 organisations who failed to pay their staff the appropriate minimum wage rates for their age groups as a wake-up call to “rogue” employers.

After an investigation spanning between 2016 and 2018, it has now come to public knowledge that a total of £6.7 million was left unpaid to over 95,000 employees by both large and small organisations across the UK. According to the Government, this offence occurred for a number of reasons, including that low-paid staff were obligated to cover costs of their work uniforms, training, or parking, as well as employers failing to raise staff pay once they are eligible for a higher wage bracket — eg a 20-year-old turned 21-year-old who became eligible for a higher rate of minimum wage was still being paid at the lower rate.

Offending employers have been required to make, and have completed making, outstanding wage payments to staff based on current minimum wage rates rather than those in place at that time of the underpayment, as well as fines of 200% of the unpaid amount to the Government at a cap of £20,000 per employee.

Who is exempt from receiving minimum wage?

Not all staff are required to be paid the minimum wage. There are a number of different reasons why some staff are exempt, including workers who live and work in the employer’s household. In this case, the worker must:

  • be a member of the employer’s family

  • live in the employer’s family home

  • share in the family’s tasks and activities.

Alternatively, where the worker is not a member of the family, the following must apply:

  • the worker lives in the family home of their employer

  • the worker is not a member of that family but is treated as such (eg in relation to living space, meals, sharing of family tasks, and participation in leisure activities)

  • the worker is not required to pay, or have money deducted, for the provision of accommodation or meals

  • the work would not be treated as work if it had been done by a member of the employer’s family.

When considering whether the worker is treated as a member of the family other factors can also be examined, such as whether they are treated with dignity, are afforded autonomy or privacy, and are not exploited.

Students who carry out work experience placements are also exempt from minimum laws where the placement is no longer than 12 months and the placement is required as part of a UK-based higher or further education course. Work experience can also be known as a “placement” or “internship” and where this experience does not fall within these criteria, and the individual is carrying out “work” during the experience, they will be entitled to minimum wage.

People classed as volunteers are also exempted from minimum wage laws.

Change is coming

To avoid any penalties and/or time-consuming (and expensive) tribunal claims, employers should keep in mind that there will be some very crucial changes to the minimum wage set-up from 1 April 2021.

In his address to the House of Commons on 26 November 2020, the Chancellor, Rishi Sunak, announced that NMW rates will be increasing and that the age threshold for the NLW will be lowered to cover 23-year-olds and above.

The table below shows the current minimum wage rates and the changes from 1 April 2021:

Age

Current rates

Rates from 1 April 2021

Workers aged 25 and over (NLW)

£8.72 an hour

Workers aged 23 and over (NLW)

£8.91 an hour

Workers aged 21–24

£8.20 an hour

Workers aged 21–22

£8.36 an hour

Development rate for workers aged 18–20

£6.45 an hour

£6.56 an hour

Young workers rate for workers aged 16–17

£4.55 an hour

£4.62 an hour

Apprentices under 19, or 19+ but in the first year of the apprenticeship

£4.15 an hour

£4.30 an hour

Parting note

It may be easy for the law to be misconstrued when it comes to minimum wage, especially as it changes on a yearly basis. However, it is important that employers keep in mind that the onus remains on them to ensure that they are keeping in line with the law, as made clear by the Government.