All employees are typically covered by both the National Minimum Wage (NMW) and the new Living Wage (LW).  Employers must pay at least this for all hours worked by a employee.

PFN Payroll monitors all new government regulation in such areas and will normally advise clients where it appears they may inadvertently contravene such rules in respect of their payroll.

Employer’s should note that the NMW and the LW set out the minimum GROSS hourly rates not the net pay rates.

The amount of the NMW / LW is determined by an employee’s age.

From October 2015, an employee of age 21 or over must receive the “main rate” of at least £6.70/hr gross.  An employee aged 25 or over would be covered by the Living Wage and must receive £7.20/hr gross.  An employee aged 18 to 20 must receive at least the “development rate” of £5.30 per hour gross.

These rates are usually increased every October and with the introduction of the Living Wage, there may be further increases every April.

If an employee is provided with accommodation, an employer can offset some of the cost of this against the employee’s wage for national minimum wage purposes. It should be noted however that the maximum allowable offset is £5.35 for each day accommodation is provided (£37.45 per week). If an employee is residential and lives as part of the family, these minimums do not apply, so it is not necessary to use the offset.

Please note, only an employee who lives as part of the family (e.g. eats meals with the family, socialises with the family and friends of the family) is not covered by the NMW / LW. All other employees are covered by these minimum rates even if they live-in.

IMPORTANT: Providing accommodation for employees outside the employer’s home may well attract a very substantial tax charge. Employers are advised to take advice on this before offering an employee any such accommodation.