Victoria Templeton, HR Knowledge Manager at HR Solutions, explains what employers and employees need to know about the National Minimum Wage and National Living Wage.

What is the National Minimum Wage?

The National Minimum Wage Act 1998 was introduced to create a statutory minimum hourly wage rate for employees and workers. The National Minimum Wage (NMW) framework includes different pay levels depending upon a person’s age. 

When first introduced back in April 1999, the pay bands within the NMW were broken down for those of the age of 22 years and above, youth development group which included those aged between 18 and 21 years, and an age rate of 16-17 years of age.

Since then, we have seen further age categories added and the boundaries of the categories also change. 

What is the difference between the National Minimum Wage and the National Living Wage?

The NMW is different to the National Living Wage (NLW). The NLW which was introduced later in 2016 and again, as part of an amendment to the National Minimum Wage Act of 1998, introduced a new age category. It required a certain pay rate to be given to all those who were 25 years and above.  Consequently, other age groups as set out within the legislation also changed.

Over time, we have seen may changes to the minimum statutory pay rates and currently, we have the following minimum payments in place:

National Living Wage	23 years and above	£9.50
National Minimum Wage	Everyone aged 21 – 22 years	£9.18
Development Rate	Everyone aged 18-20 years	£6.83
Rate for young workers	Everyone aged 16–17-year-olds, excluding those of compulsory school age	£4.81
Apprentice Rate	Apprentices under the age of 19 years old or is aged 19 or above and in their first 12 months of an apprenticeship	£4.81

Who gets the National Minimum Wage?

Most employees and workers are eligible for the minimum wages, so this includes agency workers, and those on zero hours or casual agreements. They must work in the UK under a contract and no longer be of compulsory school age.

Who is not entitled to the National Minimum Wage?

There are exclusions within the National Minimum Wage Act 1998, so not all individuals will be entitled to the NMW or NLW. Some of these exclusions include:

• those who are self employed
• company directors
• volunteers
• members of the armed forces
• those undertaking a trial period of work (six weeks or less) as part of specified schemes that either provide training, work experience, or help in obtaining work
• in England, those who work as part of a traineeship, when it is a skills programme
• students doing work experience as part of a higher education course or further education course in the UK

How do you calculate the National Minimum Wage?

To calculate whether a worker or employee is receiving the minimum wage requires calculating an hourly rate of pay. This involves looking at the payments received within a reference period and dividing the payments received by the number of hours worked.

The statutory right is to be paid at or above the minimum wage on average for time worked over a pay reference period, not to be paid for each actual hour worked.

The reference period that is used would be based on the intervals in which the employer pays the employee, such as weekly, monthly or any other period up to a maximum of a month.

What happens if you do not pay the National Minimum Wage?

A worker/employee can submit an employment claim or a claim through the civil court where they have not been receiving the minimum wage.

There is legal protection from being dismissed or receiving unfair treatment because of their legal right to a minimum level of pay rate. Furthermore, the Equality Act 2010 provides protection for people not to be discriminated against based on age, so any failure to pay this rate of pay could also be discriminatory.

What is the real Living Wage?

In addition to the NMW and NLW, there is also the real Living Wage. It was created by the Living Wage Foundation, a foundation that recognises that wages should reflect everyday needs. It differs from the NMW and NLW because it is a voluntary scheme that an employer can subscribe to, whereas the NMW and NLW is the legal minimum in which all employers must pay.

About the author

Victoria Templeton is the HR Knowledge Manager at HR Solutions, an outsourced HR services firm offering employment law, and health and safety support and advice to businesses across the UK.

See also

What is the holiday pay and entitlement for zero-hours contract workers?

A beginner's guide to payroll software

Find out more

National Minimum Wage Act 1998 (Legislation)

Equality Act 2010 (Legislation)

Image: Getty Images

Publication date: 18 July 2022

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.