What is the National Living Wage?

When running a business, you’ll likely have people of all ages working for you. Pay rates vary for different ages, but if your staff are 23 and over, you’ll have to pay the National Living Wage.

If your workers aren't paid correctly, you could face claims against you at an employment tribunal, or even a civil court. Consequently, your business could experience financial and reputational damage.

In this guide, we'll discuss what the National Living Wage is, what employees are entitled to, and the consequences of incorrectly paying wages.

What is the National Living Wage?

The National Living Wage is a minimum hourly rate that all employees - and workers - over the age of 23 must receive. Unless they’re in the first year of an apprenticeship.

This wage is a legal requirement, so any eligible workers must receive the correct amount. Not doing so is against employment law and may lead to claims in the future.

What is the Real Living Wage?

The Real Living Wage was created by the Living Wage Foundation, and is the only UK wage rate based fully on the current living costs. Paying your staff the Real Living Wage can help them afford everyday essentials, such as the weekly shop.

Unlike the National Minimum Wage and the National Living Wage, this isn't part of your legal responsibilities. It's a voluntary scheme that employers can subscribe to before paying their employees.

The Real Living Wage rate is:

• £13.15 per hour in London.
• £12 per hour for workers outside of London.

These rates are reviewed each October.

What happens if you don't pay your employees the correct wage?

If you don't pay your employees the correct wage it could result in claims to an employment tribunal or civil court.

You must pay your employees correctly for their pay reference period. This period is how often someone is paid, typically weekly or monthly.

Even if you're paying your workers at the correct rate, you may still be underpaying them. This is especially the case when an employer makes wage deductions. For example, you might need to make deductions if you’ve paid for an employee’s transport or food. If this is the case, then you must pay any arrears immediately.

Not paying your workers the correct amount could lead to claims being raised against you at an employment tribunal or civil court, with financial compensation to pay.

Are all workers entitled to the National Living Wage?

Yes, any workers who are over the age of 23 are entitled to the National Living Wage by law. The only exception is those in the first year of their apprenticeship agreement – here the apprentice rate applies.

What is the difference between National Minimum Wage and National Living Wage?

The main difference between the National Minimum Wage and the National Living Wage is that they apply to different age groups. Employees on the National Minimum Wage will be paid less than those on the National Living Wage.

For example, the National Living Wage is paid to any workers you have over the age of 23. Whereas the National Minimum Wage is the rate paid to any staff you have under the age of 23 - who are at least school-leaving age.

How much pay should employees receive?

It's vital you understand the minimum wage rates for all your employees, this'll ensure you're paying all your staff correctly. Remember, any workers you have are legally entitled to the correct pay.

Below are the amounts you should pay your workers:

National Living Wage for employees aged over 21

For workers aged over 23, they should receive the following rates of pay (from April 1st 2024):

• £11.44 per hour.

It's illegal for you to pay your workers aged over 23 less than this amount. If you do, your employee could raise a claim against you at an employment tribunal. Remember, this is the current rate of pay, but it is reviewed each April.

National Minimum Wage for employees aged 18 to 20

Any worker aged under 23 must receive the National Minimum Wage. As of April 2023, this rate increased.

The National Minimum Wage rates for employees are (from April 1st 2024):

• Aged 18 to 20: £8.60 per hour.
• Under 18: £6.40 per hour.

Wage for apprentices

If you have apprentices working in your business, it's vital you pay them properly. Apprentices in their first year are legally entitled to the apprenticeship National Minimum Wage - which is £6.40 per hour.

Apprentices aged 19 or over are legally entitled to the higher National Living and Minimum Wage relevant to their age group. However, they must have completed the first year of their apprenticeship. Ensure you pay them for all the time they spend working, as well as any time spent training.

How to check you're paying the correct rates

To avoid incorrectly paying employees, you must have a process in place. You can take the following steps to ensure staff are paid correctly:

• Check the new rates on the Gov website.
• Correctly identify your workers are eligible for which pay rate.
• Correctly update your company payroll, making your staff aware of any changes made.

Get expert advice on the National Living Wage with Peninsula

If you own a company, your workers will probably be made up of a range of different ages. And when this happens, they'll be entitled to different rates of pay by law. One example of this is the National Living Wage.

If your workers aren't paid correctly, you could face claims against you at an employment tribunal or a civil court - with financial compensation to pay.

Peninsula offers expert advice on the National Living Wage. Our teams offer 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.

Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.