Blog

18 April 2017
What’s the difference between National Minimum Wage and National Living Wage?

The National Minimum Wage and National Living Wage were established to ensure that all workers are offered fair pay. The National Living Wage is set to change in April 2017… or was it the National Minimum Wage? There seems to be confusion between the two so we wanted to provide some clarification on the two.

On 1 April 2016, the Government introduced a new National Living Wage for all working people aged 25 and over. As of April 2017, the National Living Wage increased to £7.50 from £7.20. It is projected to rise to £9.00 by the year 2020. Launched under former chancellor George Osborne in 2015, it represents the government’s aim of raising the wages of those aged 25 and older to £9 an hour by 2020. The decreed hourly rate will change each year in April until it reaches the £9 target, however, there is no guarantee this will be the case as the rate will still be set by the Low Pay Commission and they must still consider what the market as a whole can bear. In other words, it could be much less than £9 by 2020.

To be eligible for the National Living Wage, you must be a worker and at least 25 years of age or over. The Living Wage is currently £8.25 in Scotland. It is independently calculated based on what is needed to achieve a low cost, but acceptable standard of living. Despite the name, this new rate is essentially a new Minimum Wage for the over 25s.

The National Minimum Wage is exactly as it sounds. It is the minimum pay per hour workers are entitled to by law and is reviewed yearly by the government. The rate for each age group in the UK is different.

These are the National Minimum Wage rates:

  • Aged 25+: £7.50 per hour
  • Aged 21–24: £7.05 per hour
  • Aged 18–20: £5.60 per hour
  • Under 18: £4.05 per hour
  • Apprentices: £3.50 per hour

To be eligible for the National Minimum Wage, you must be a worker and at least school-leaving age.

Key facts about the two:

  • Most workers over school leaving age will be entitled to receive the NMW.
  • The NMW /NLW rate is reviewed annually by the Low Pay Commission.
  • HM Revenue & Customs (HRMC) can take employers to court for not paying the NMW/NLW.
  • There are a number of exemptions to those who receive the NMW/NLW. These do not relate to the size of the business, sector, job or region.
  • The compulsory National Living Wage is the national rate set for people aged 25 and over.

We hope that clears things up. If you are unsure if you are being paid what you are entitled to, then get in touch with the Acas helpline and ask for advice, or even make a confidential complaint.

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