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National Minimum Wage from October 2016

We are approaching that time of year again – the time to think about National Minimum Wage rate increases.

Ian   Holloway
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Ian   Holloway
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We are approaching that time of year again – the time to think about National Minimum Wage rate increases.

 

On 14 March 2016, the UK government accepted the proposals in the Low Pay Commission’s (LPC) spring 2016 report about the National Minimum Wage (NMW) rates that will apply from October 2016. Last week, the draft National Minimum Wage (Amendment) Regulations (No 2) 2016(National Minimum Wage (Amendment) Regulations (No 2) 2016) were approved in the House of Lords. They apply UK-wide, amend regulation 4A of the National Minimum Wage Regulations 2015 and state that the NMW rates for the first pay reference period on or after 1 October 2016 are as follows:

 

• The rate for 21- to 24-year-olds will increase by 25p to £6.95 per hour (from £6.70).
• The rate for 18- to 20-year-olds will increase by 25p to £5.55 per hour (from £5.30).
• The rate for 16- to 17-year-olds will increase by 13p to £4 per hour (from £3.87).
• The apprentice rate will increase by 10p to £3.40 per hour (from £3.30).
• The accommodation offset will increase by 65p to £6.00 per day (from £5.35).

 

These increases are in addition to the National Living Wage rates that apply to those who are 25 years old or over.

At the time of any changes to the rates in the NMW regulations, I always point out the importance of the pay reference period. The pay reference period is the period of time for which payment is being made. As a simple example:

 

A weekly payroll pays on 6 October 2016 for the week up to and including Sunday 2 October 2016. This means there is a pay reference period that runs from 26 September to 2 October. The first pay reference period on or after 1 October does not start until 3 October. The rate legally payable to the worker is dependent on the date that the pay reference period started and their age at that date. For example, using the above weekly example:

 

If the worker is 24 on 26 September 2016, there is a legal obligation to ensure they are paid at least £6.70 per hour for the whole pay reference period. Assuming they are still 24 on 3 October, there is a legal obligation to ensure they are paid at least £6.95 per hour.

 

If the worker is 24 on 26 September 2016 but turns 25 on 27 September, there is a legal obligation to ensure they are paid at least £6.70 per hour for the whole pay reference period ending 2 October but they must be paid at the National Living Wage of £7.20 for the pay reference period starting 3 October.

 

Remember, the legal obligation is all to do with the pay reference period. Of course, in the above examples, the employer can pay from 1 October if they want to or from the date the worker moved into another age bracket. All I am pointing out is that there is no statutory obligation to do so.

 

The above 14 March 2016 press release also signalled a welcome change to the “minimum wage calendar” from 1 April 2017. At this time, reviews of both the National Living and National Minimum Wage rates will be aligned to be effective April each year.

 

Therefore, note that the above NMW rates only apply for six months up until 31 March 2017.

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National Minimum Wage from October 2016 National Minimum Wage from October 2016
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