Look out for The National Minimum Wage (Amendment) Regulations 2018 that will come into force on 01 April 2018...
This will update the National Minimum Wage Regulations 2015 and see the following rates put into legislation:
* For apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to rate applicable for their age.
Further, the Accommodation Offset daily rate increases by 9.4% from £6.40 to £7.00.
And the effective date is…
Unlike HMRC’s recent announcement to software developers, the new rates are not effective 01 April 2018. They are effective from the first full Pay Reference Period (PRP) that starts on or after 01 April 2018.
I expect newspapers, advertisements and television stations will be repeating the same information in due course so be careful.
What is the Pay Reference Period?
The PRP, according to the National Minimum Wage Regulations 2015, is the period of time for which someone is paid:
A “pay reference period” is a month, or in the case of a worker who is paid wages by reference to a period shorter than a month, that period.
The date that they are actually paid is not relevant. It is all to do with the period of time that is measured for that payday. For example:
A monthly-paid employee
Will often be paid from the first to the last working day of the month and this is their PRP. In April 2018, the PRP will be 01 to 30 April. The fact that the employee might be paid on 25 April has no bearing on the PRP, which is still 01 to 30 April.
A weekly-paid employee
Will have a PRP of a week. For example, someone that is paid on Friday 06 April 2018 may be paid in arrears for the week that commences 26 March and finishes Sunday 01 April 2018.
Determining the applicable rate and the PRP…
Having established what the PRP is, the next step is to determine what the law says about the rate of pay that should be paid in that PRP. The National Minimum Wage (Amendment) Regulations 2016 really help to clarify this in simple terms and say that the minimum hourly rate:
‘at which the worker is entitled to be remunerated as respects work in the pay reference period is the rate that applies to the worker on the first day of that period’.
So, referring back to the above examples:
- 01 to 30 April 2018 PRP – the worker must be paid at least the rate that applied on the first day of the prp, i.e. 01 April 2018. If the worker was aged 24 on the first day of the PRP then they are legally entitled to be paid at £7.38, even if they reach the age of 25 during the PRP
- 26 March to 01 April 2018 PRP – the worker must be paid at least the value of the NMW / NLW that applied on the first day of the PRP (26 March). If they are 25 on this day they have a statutory right to be paid at £7.50 for the entire PRP. 01 April does not have to be paid at the increased rate of £7.83, as that rate only applies for the first full PRP on or after 01 April 2018 (which commences 02 April)
There is absolutely nothing to say that an employer cannot make payment at the increased rate on 01 April 2018 if they chose to. The whole point of this article is to say that the employer is not breaching the NMW / NLW Regulations if they apply the legislation as it is written.
Further, employers have to be careful about the hours that constitute working hours and the deductions that may or may not reduce NMW pay. There is a lot of guidance out there, however, it is worth starting with that written by the Advisory, Conciliation and Arbitration Service (ACAS) and NIdirect and working on from there.
There’s a lot to think about….