Our thoughts on the latest developments in our specialist sectors and services.

Increases to National Minimum Wage and National Living Wage

01 April 2019

As of 1 April 2019, new rates for the National Minimum Wage and National Living Wage will take effect.

The National Minimum Wage (NMW) applies to workers under 25 and the National Living Wage (NLW) applies to workers aged 25 and over.

The new rates will apply to the pay reference period that begins on or after 1 April. As an example, this means that employees who receive their monthly pay on 20 April will not receive the new rate until the pay reference period beginning on 21 April. The following workers are exempt from the entitlement to the NMW or NLW:

  • Self-employed individuals;
  • Volunteers or voluntary workers;
  • Company directors;
  • Family members, or people who live in the family home of the employer who undertake household tasks;
  • Work experience students, depending on the length of their placement; and
  • Members of the armed forces.

It is unlawful for employers not to pay the NMW or NLW to eligible workers and they will be at risk of a claim in the Employment Tribunal or an investigation by HMRC. If HMRC find that an employer has underpaid NMW or NLW, they can require the employer to pay arrears to the employee and can impose a penalty of up to 200% of the total underpayment, with an overall maximum penalty of £20,000 per underpaid worker.

In their updated Guidance to Calculating the Minimum Wage published in December 2018, the Government clarified that deductions made from the worker’s pay for items or expenses connected with their job will reduce pay for NMW/NLW purposes. Examples of typical job-related expenses include safety clothing or uniforms. For example, if a fashion retailer requires their staff to pay for and wear branded clothing the cost of the clothing paid by the worker would be deducted from the calculation of their pay for NMW/NLW purposes, which may mean that the employer is paying less than the NMW/NLW and may be liable for arrears and a penalty.

You can see the new NMW and NLW rates here.

Increases to Employment Compensation Limits

On 6 April 2019, several statutory compensation limits will increase. Some of the key updates include:

  • The upper limit for Compensatory Awards for unfair dismissal will increase from £83,682 to £86,444. Ordinary unfair dismissal Compensatory Awards are subject to a separate cap of one year’s gross pay. This means the maximum Compensatory Award for unfair dismissal will be the lower of either one year’s gross pay or the new limit of £86,444. The cap for unfair dismissal claims does not apply where the reason for the dismissal is that the employee has carried out health and safety activities or has made a protected disclosure.
  • In order to calculate the Basic Award in unfair dismissal cases and statutory redundancy payments, a statutory ‘Week’s Pay’ will have a cap of £525 (increased from £508).
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