National Minimum Wage – The new rates from April 2021

National Minimum Wage

The National Minimum Wage will increase from April 2021. The higher rate also known as the National Living Wage will be £8.91 per hour.

Below we go through the new rates. There are also important new changes for 23 and 24 year olds.

How much per hour is the National Living Wage?


From April 2021 the new rate is £8.91 per hour. Previously this was £8.72 (2020/21 tax year)

Who qualifies for the National Living Wage?


From April 2021 the qualifying criteria has been extended to 23 and 24 year olds. Previously this was only applicable to those aged 25 years or older.

NOTE: The current rate (2020/21) for 23 and 24 year olds is £8.20 per hour, so this increase to £8.91 will likely catch out a few employers.

What are the National Minimum Wage amounts for the other age groups?


From April 2021 the hourly rates are as follows:

21 to 22 year olds must receive a minimum of £8.36 per hour
18 to 20 year olds must receive a minimum of £6.56 per hour
Under 18s must receive a minimum of £4.62 per hour

What is the minimum hourly rate for apprentices?


From April 2021 the apprenticeship rate is £4.30 per hour.

The apprenticeship rate is applicable for those on an apprenticeship aged under 19 years of age or if they are in their first year of the apprenticeship.

What are the minimum hourly rates for employees?


Below is a summary of the new rates:

£8.91 for 23 years old and over
£8.36 for 21-22 years old
£6.56 for 18-20 years old
£4.62 for under 18s
£4.30 apprenticeship rate

From what date do the new rates apply?


The new rates for the National Living Wage and National Minimum Wage are applicable from 1st April 2021.

Does everyone qualify for the National Minimum Wage?


No. Not everyone is entitled to receive the National Minimum Wage.

The main individuals who are exempt are the following:

Self-employed individuals,
Company Directors,
Volunteers,
Students on work placements
Workers younger than school leaving age (i.e Usually 16)

TAX TIP: We strongly recommend that if you are a Company Director that you pay yourself the Optimum Directors Salary.

What is the National Living Wage?


You may have heard of the National Living Wage and wonder how this differs to the National Minimum Wage.

The terms are often interchangeable, however the correct definitions are as follows:

The National Living Wage is only applicable to those aged 23 and over (from April 2021). It relates to the rate of £8.91 per hour.

The National Minimum Wage is the minimum amount payable to all of the other workers. As a result, the rates for those aged 22 and under (from April 2021) are all National Minimum Wage rates.

What are the penalties for not paying the minimum hourly rates?


It is against the law to pay workers less than the UK National Living Wage or National Minimum Wage. Workers not receiving the minimum hourly rate should speak to their employer immediately.

Should the issue not be resolved, typically the worker would either go to an employment tribunal or could even ask HMRC to investigate.

If found guilty, the penalty can be anything up to £20,000 per worker. The company Director can be publicly named and banned from being a Director for up to 15 years.

National Minimum Wage – Steps to take

The hourly rate increases are clearly defined by age boundaries. As a result, it is important to ensure that the correct dates of birth for all workers are known.

Any employee aged 17, 20 and 22 years of age should have their birthdays noted as they will change to a different pay group. For example a 22 year old will be entitled to £8.36 on 1st April 2021. However, on their 23rd birthday, this will increase to £8.91 per hour.

The National Living Wage has been extended to include 23 and 24 years from 1st April 2021. We therefore recommend all workers aged 23 and 24 are identified and checked to ensure compliance.

Most businesses now use commercial software. Ensure that all date of births are entered as some software will warn you if there is an issue.

For further information see the HMRC website

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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