The national minimum wage was first introduced, by the Low Page Commission back in 1999 with little change other than the annual rises over the years.
However, from the 1st of April 2016, a new element, called the national living wage will be introduced for employees over the age of 25. This rate will be set at £7.20 per hour in 2016.
The national minimum wage will continue to apply to those under 25 years old at rates depending on their age.
These range from £3.87 per hour for 16-17 year olds to £6.70 per hour for those over 21, but younger than 25. Different rates apply for apprentices.
The national living wage will include a majority of workers including agency, casual and agricultural workers.
There are, however, some exemptions including self employed people, company directors and family members.
Failure to pay the correct rate be in national minimum wage or national living wage is of course illegal, as is falsifying records. Penalties are high at 200% of the amount owed, and a maximum fine for non payment of £20,000 per worker.
There is a further recommended wage rate confusingly named the living wage.
This is a voluntary rate which is set by the Living Wage Foundation and is calculated according to the basic cost of living in the UK. The current rate for most of the UK is £8.25 per hour, with £9.40 per hour in London.
To help compensate employers for the increased cost is a rise in the employment allowance. This allowance, which was introduced in April 2014, gave employers an allowance of £2,000 of employers’ National Insurance. From April 6 this will rise to £3,000 per tax year.
•Gail Kristiansen is a book keeping manager for Rennie Welch LLP. She can be contacted on 01573 224931 or via email email@example.com