The UK Government accepted the recommendations of the Low Pay Commission (LPC) regarding the rates of the National Living and Minimum Wage to apply from April 2020.
This acceptance is detailed in the ‘Government response’ document dated only December 2019. A UK Government announcement dated 31 December 2019 comments that the new rates will mean that the target of raising the National Living Wage to equal 60% of median earnings, as announced in 2015, has been achieved.
Budget 2020 on 11 March 2020 confirmed these rates.
The National Minimum Wage (Amendment) Regulations 2020 Statutory Instrument comes into force on 01 April 2020. They update the governing National Minimum Wage Regulations 2015 which apply UK-wide.
The table below shows these new rates together with details of the increases that have been applied:
|Rate||Current Rates||Increase||Increase||From April 2020|
|Adults (25+) aka the National Living Wage||8.21||6.2||0.51||8.72|
|Adult (21 – 24)||7.70||6.5||0.50||8.20|
|Youth Development (18 – 20)||6.15||4.9||0.30||6.45|
|16 – 17 Year Old (under 18 but over school leaving age)||4.35||4.6||0.20||4.55|
* For apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the rate applicable for their age.
Further, the Accommodation Offset daily rate increases by 65p (8.6%) from £7.55 to £8.20.
And the effective date is….
The letter from Bryan Sanderson, Chair of the Low Pay Commission to the Secretary of State says that the rates will apply from 01 April 2020. Further, the above amendment Regulations will state that the legislation comes into force on 01 April 2020. A good many announcements, newsletters and Webinars also state 01 April 2020 and imply that this is the date that they are effective. Indeed, a Gov.UK press release dated 01 April 2020 says:
The National Living Wage (NLW) will increase on Wednesday 1 April
However, the new rates are not effective 01 April 2020. They are effective from the first full Pay Reference Period (PRP) that starts on or after 01 April 2020.
I expect newspapers, advertisements and television stations will be repeating the same incorrect information about 01 April, so be careful.
Though it brings into question:
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 irrelevant. 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 2020, the PRP will be 01 to 30 April. The fact that the employee might be paid on 24 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 10 April 2020 may be paid in arrears for the week that commences Sunday 29 March and finishes Saturday 04 April 2020.
The fact that they are paid after 01 April 2020 has no bearing on the PRP which started before 01 April 2020.
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. When making amendments to the 2015 regulations, The National Minimum Wage (Amendment) Regulations 2016 really help 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 2019 PRP – the worker must be paid at least the rate that applied on the first day of the prp, i.e. 01 April 2020. If the worker was aged 24 on the first day of the PRP then they are legally entitled to be paid at £8.21, even if they reach the age of 25 during the PRP
- 29 March to 04 April 2020 PRP – the worker must be paid at least the value of the NMW / NLW that applied on the first day of the PRP (29 March). If they are 25 on this day, they have a statutory right to be paid at £8.21 for the entire PRP. The days from 01 April do not have to be paid at the increased rate of £8.72, as that rate only applies for the first full PRP on or after 01 April 2020 (which commences 05 April)
There is absolutely nothing to say that an employer cannot make payment at the increased rate on 01 April 2020 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.
At a time when we have plenty of other things, here’s something else to think about….