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The Autumn Statement 2023 announced an increase in the UK minimum wage 2024 for all four wage categories. Changes in minimum pay always begin in April, as per the UK’s fiscal year.
This article covers the UK minimum wage system, wage increases in 2024, employers’ responsibilities, how employees can check if they are paid right, what to do if underpaid, and more. It also discusses the real living wage and FAQs about the UK minimum wages.
The UK Minimum Wage System
The Labour Government introduced the UK minimum wage in 1999 initially with two simple categorisation based on age. The bands increased to three in 2004, four in 2010, five from 2016 to 2023, and back to four in 2023 and the 2024/25 fiscal year. The national living minimum wage 2024 UK over 25 was only introduced in 2016.
Currently, the four wage bands include:
- National Living Wage (NLW)
- National Minimum Wage (NMW) divided into two tiers (age-based)
- Separate Apprentice Rate
These wages are evaluated and set annually by the Department for Business and Trade under the advice of the Low Pay Commission (LPC), an independent advisory organisation. Every UK employer is legally obliged to pay the right amount to their employees. Failure to do so is a criminal offence.
There is also an alternative wage system called the Real Living Wage (RLW), which is not government-initiated, hence, optional for businesses. It started in 2016 and is mandated by the Living Wage Foundation charity contending that the existing minimum and living wage rates could not sustain employees through the present cost of living crisis or inflation forecasts.
Currently, 14,000 firms follow the RLW rate, which did not increase alongside other wages in April 2024. The real living minimum wage per hour London, or the London living wage, remains at £13.15. For the rest of the UK, the rate also remains at £12. However, whilst RLW rates did not increase, a RLW earner would still earn 5,323 more than a London minimum wage 2024 earner.
Who Can Get the Minimum Pay
Everyone with an employment status in the UK gets the government’s standard minimum salary. This is regardless of if they are full-time, part-time, training, or working for a small or start-up firm. The minimum wage applies to employees, such as the following:
- Apprentices
- Agency staff
- Foreign labourers
- Offshore workers
- Commission-based workers
- Workers on probation
- Agricultural labourers
- Home-based workers
- Zero-hour workers
- Seafarers
- Casual labourers (e.g., hired for a single day)
- Piecework labourers (paid by the number of items made)
Individuals who live in their employer’s home must also be paid the right minimum wage, too, unless they are a member of the employer’s family. Note that employees not paid by the hour are also entitled to the right minimum wage.
Who Cannot Get the Minimum Pay
Those who do the following are not entitled to the minimum pay:
- A volunteer (by choice)
- Self-employed (by choice)
- A company director
- Doing work experience as part of a course
- In the armed forces
- Under school leaving age
- Work shadowing
What Is Minimum Wage 2024
From 2023, the UK government will be maintaining four waging categories, as below. The following table also compares the previous and new minimum wage rates, the latter taking effect from April 2024:
| WAGE BAND | CURRENT RATE | PREVIOUS RATE |
|---|---|---|
|
Age 21 or over (National Living Wage) |
£11.44 |
£10.42 |
|
Age 18 to 20 (National Minimum Wage) |
£8.60 |
£7.49 |
|
Under 18 (National Minimum Wage) |
£6.40 |
£5.28 |
|
Apprentice Rates |
£6.40 |
£5.28 |
Read on for more information about each wage band.
What Is the National Living Wage
Working people over the age of 21 receive the National Living Wage. From April 2024, the new rate rises from £10.42 to £11.44 per hour.
This means an annual £1,800 increase in pay for full-time employees who are already receiving NLW. For those who have just turned 21 and moved up from the lower National Minimum Wage, the annual pay increase amounts to £2,300.
What Is the National Minimum Wage
The NMW rates apply to employees between the ages of 16 and 20. As NMW is divided into two tiers, the minimum wage 16 year old (up to 17) differs from the national minimum wage 2024 18 year old (up to 20). Changes from April 2024 are as follows:
- 16 or 17 — up from £5.28 to £6.40 per hour
- 18, 19, or 20 — up from £7.49 to £8.60 per hour
Separate apprentice rate may also apply. See below for more information.
What Is the Separate Apprentice Rate
The Separate Apprentice Rate applies to apprentices under or over 19 if they meet the criteria. From April 2024, the rate is up from £5.28 to £6.40 per hour, similar to the National Minimum Wage for a 17 year old UK. Those who are entitled to the apprentice rate are:
- Under 19
- 19 or more and in the first year of their present apprenticeship contract
- 19 or more and have completed the first year of their present apprenticeship contract
How to Check If the Pay Is Correct
UK employees must also double-check whether they are paid right, as discrepancies may happen if they move up to a higher minimum rate in a fiscal year. Any increase must be paid, such as when:
- The government implements another increase in April
- If they turn 18 or 21
- If they are an apprentice turning 19 or have finished the first year of their present apprenticeship contract.
Commission counts toward the minimum wage. This means employers will need to “top up” their employees’ pay if they do not earn enough commission to reach the minimum wage. What does not count are the following:
- Gratuities and tips
- Additional premiums (e.g., compensation for working on bank holidays or overtime)
- Employer-provided loans
- Salary advances
Deductions and Expenses
Employees must take note that they may take home less than the minimum pay as their employers make the necessary deductions, which may include:
- National Insurance contributions and tax deductions
- Pension contributions
- Reimbursing advances or overpayments
- Fees for trade union membership
- Charges for employer-provided accommodation
Expenses and deductions that cannot be reduced from the employers’ minimum pay are as listed:
- Uniforms
- Tools
- Travel
- Mandatory training courses
How to Calculate the Pay
Employers can work out their average hourly rate once they have the following details:
- Gross pay (total amount) every time they receive their pay
- The total hours they rendered for that pay
Complaints can be made directly to HMRC if incorrect payments are discovered. See below for other options.
What to Do If the Pay Is Incorrect
HMRC considers non-compliance a criminal offence and fines employers if they pay less than the correct UK minimum wage.
What Employees Can Do
Most of the time, the issue can be solved informally between the two parties. However, if the employee chooses the formal process, they may:
- Raise a formal grievance to their employer
- Directly complain to HMRC
- Make a claim to an employment tribunal
What Employers Should Do
Informally solved or not, employers are responsible for the following:
- Keep correct pay records and provide them whenever requested.
- Resolve any incorrect payment issues immediately.
- Resolve any backdated non-payment of minimum pay.
Employees may also seek help from business and financial advisors who can serve as a buffer and reference for accuracy throughout the process.
Frequently Asked Questions
Some research indicates that businesses might increase their prices to cover the higher costs or accept lower profit margins. However, some studies have shown that the minimum wage has improved business productivity.
The UK minimum wage rates can help lessen income inequality and poverty. However, there are downsides, such as possible job cuts if businesses cannot afford increasing wages and the risk of inflation if businesses transfer costs to consumers.
The UK minimum wage system is designed to protect many lower-paid employees as much as possible without negatively affecting the economy or jobs.
The minimum wage had little effect on employment, but the Low Pay Commission (LPC) did gather some evidence that the increasing NMW resulted in a little reduction in work hours.
The UK boasts a relatively high minimum wage compared to other OECD nations in terms of its value. In 2022, it ranked eighth out of 25 OECD countries based on the National Living Wage rate, adjusting for differences in the cost of living.
How Legend Financial Can Help
The UK minimum wage 2024 has yet again faced an increase. With the changes, it is crucial that your business maintains an efficient payroll system to avoid disputes in the long run. Legend Financial is comprised of tax, financial management, and business development experts who can provide comprehensive support to your business.
We have helped a lot of business and individual clients in the UK with all kinds of tax, financial, and business affairs, garnering loyal customers every time we accomplish a case. Reach us today regarding these matters!
