17 January 2022

The CIPP’s policy and research team explores one of the most intricate areas of payroll


On the surface, ensuring staff are paid at the NMW / NLW may appear simple. Payroll professionals will tell you that this is not the case, and there are plenty of intricacies involved in this area.

  • the NMW and NLW are separate from the real Living Wage, which is not mandatory and is independently calculated based on the cost of living. There is a special rate for London, where it is accepted that the cost of living is higher. The real Living Wage applies to anyone aged 18 plus, and unlike the NMW and NLW, isn’t governed by other age brackets

  • use your voice: NMW and NLW rates are set by the Low Pay Commission (LPC) on an annual basis. The CIPP’s policy team responds to LPC consultations on the topic each year. Full members of the CIPP, and above, are invited to attend think tanks on this subject. Make sure you get involved and have your say. Look out for invites to the next think tank

  • salary sacrifice arrangements must not decrease somebody’s pay below the appropriate NMW / NLW rates. Be alert to this, as it is a commonly reported mistake

  • Her Majesty’s Revenue and Customs (HMRC) is responsible for the enforcement of NMW regulations, but the Department for Business, Energy and Industrial Strategy (BEIS) is responsible for minimum wage strategy

  • the new single enforcement body, which will combine three of the current market enforcement bodies, will be responsible for combatting breaches relating to the NMW / NLW in the future

  • NMW / NLW is determined by the age that an individual is at the start of a pay period. Their rate increases from the pay reference period on or after their birthday

Example:

Roy turns 23 on 30 April 2021. He gets paid for the period 1 May 2021–31 May 2021 on 26 May 2021, so he is entitled to the NLW (currently £8.91) for that period. In his previous pay, paid out on 26 April 2021, for the period 1 April 2021–30 April 2021, he was paid the 21–22-year-old rate of £8.36 per hour

  • there are several types of work to be considered when considering how to calculate the NMW / NLW. They are:
    • salaried hours work
    • time work
    • output work
    • unmeasured work.
  • employers who fail to pay the NMW / NLW can be publicly named. BEIS is responsible for publishing those names

  • voluntary workers are not entitled to the NMW /NLW. To fall into this category, the worker must fall within the strict criteria of a voluntary worker

  • the apprenticeship rate applies to apprentices below the age of 19, and to anyone aged 19 and above and in the first year of their apprenticeship. Those who are 19 and above and not in the first year of their apprenticeship need to receive the NMW / NLW relevant to their age

  • employers can take a £1 administration fee for operating an attachment of earnings order, but this must not take employees below NMW / NLW rates. 


 

Featured in the February 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.