Salary and Wages

Minimum Wage

There are 3 main terms that are used when relating to wage:

1.National Minimum Wage

2.National Living Wage

3.Real Living Wage

The National Minimum Wage (NMW) in the UK is the minimum pay per hour most workers under the age of 25 are entitled to by law. It is dependant on your age and whether you’re an apprentice. It is set annually by the Government, based on recommendations by an independent body known as the Low Pay Commission.

The NMW is applicable to every person over school leaving age, regardless of their position in the company. There are, however a few exceptions where the NMW doesn’t apply, including:

• Self-employed people running their own business

• Company directors

• Volunteers or voluntary workers

• Family members of the employer living in the employer’s home

The National Living Wage (NLW) is the minimum pay per hour most workers aged 25 and over are entitled to by law. Confusingly, NLW was simply a 2016 renaming of the NMW for over 25s by the Conservative government, and not truly linked to the cost of living.

The Real Living Wage (aka Living Wage) on the other hand is an hourly rate based on the basic cost of living in the UK.

It is calculated by the Living Wage Foundation, a campaigning organisation in the UK, and therefore has no legal grounding. However, it is considered the most accurate minimum wage level as a more realistic calculation of how much a worker needs to earn in order to meet the basic cost of living, such as rent, food and utility bills. The main benefit of paying your workers the Living Wage is that it can increase employee retention, decrease absenteeism, and enhance the quality of work produced.

Failing to Pay the NMW or NLW

It is against the law for employers to pay workers less than the NMW or NLW, or to falsify payment records. The maximum fine for non-payment is £20,000 per worker. However, employers who fail to pay can also be banned from being a company director for up to 15 years.