The government recently overhauled the remit of the Low Pay Commission (LPC) as its first step in delivering on its promise of a genuine living wage for working people. The LPC will now be required to account for the cost of living when recommending minimum wage rates to the government. The LPC has also been instructed to narrow the gap between the minimum wage rate for 18- to 20-year-olds and the national living wage as the first step towards achieving a single adult rate.
This blog sets out key information about who is entitled to the national minimum wage or national living wage, the importance of maintaining records of compliance with pay obligations, whether employees are entitled to the real living wage or London living wage, and whether you are obliged to offer staff pay increases.
Who is entitled to the national minimum wage or national living wage?
You are legally required to pay qualifying staff either the national minimum wage or national living wage. You could face enforcement action and penalties by HMRC if you fail to do so, including being publicly named.
The following staff will be entitled to payment of the national minimum wage provided that they are over the compulsory school age (ie it is after the end of the last Friday in June in the academic year in which they turn 16) and under the age of 21:
- employees (whether full-time or part-time);
- casual workers (including zero-hours workers);
- agency staff; and
- apprentices.
The rate payable depends on the age of the staff member and whether or not they are an apprentice.
Staff who are eligible for the national minimum wage and who are aged 21 or over are entitled to the national living wage, which is set at a higher rate than the national minimum wage.
You can check the current national minimum wage rates and national living wage rate on the government website.
Am I required to keep records demonstrating compliance with pay obligations?
You must keep accurate and sufficient records demonstrating that you have paid eligible staff at least equivalent to the national minimum wage or national living wage in each pay reference period.
There is no prescribed form for these records and it is likely that your payroll information will provide a sufficient record, but you will need to consider whether this is appropriate in your specific circumstances.
You are required to keep these records for six years from the end of the pay reference period following the reference period to which they relate (eg if your staff member is paid monthly, their records for January 2020 would have to be kept until the end of February 2026).
If your staff member has reasonable grounds to believe that they are not being paid the national minimum wage, they have the right to make a written request to access your records and make a copy of any part of them. If you agree to such a request, you must produce the records within 14 days, unless your staff member agrees to a later date.
Do I need to pay my staff the real living wage or the London living wage?
The real living wage and the London living wage are set independently by the Living Wage Foundation.
These rates are calculated according to the basic cost of living in the UK and are higher than the national minimum wage and the national living wage.
Paying the real living wage or the London living wage to your staff is voluntary. Therefore, unlike for non-payment of the statutory national minimum wage and national living wage, there are no legal repercussions if you fail to do so. You may wish to consider paying it, however, as it could have reputational benefits for your business and help to motivate your staff and increase staff retention rates.
Do I have to offer pay increases to staff?
There is no general obligation to offer pay increases to staff, but you will be obliged to do so in the following situations:
- if you pay the national minimum wage or the national living wage, you must increase staff pay in line with annual increases (this typically happens in April each year);
- if the staff member’s contract says that they are entitled to a regular or specific pay rise at a particular time then you must honour this;
- if you regularly increase pay over a long period of time, it can become obligatory;
- if you offer your full-time staff a pay rise, you must do the same for comparable part-time staff, and if you offer permanent employees a pay rise, you must do the same for temporary staff; and
- you must pay men and women the same for equal work.
If you want to increase a staff member’s pay, you should document the pay increase by writing to the staff member to confirm the change. See Letter to staff member confirming pay increase for a template you can use.
The content in this article is up to date at the date of publishing. The information provided is intended only for information purposes, and is not for the purpose of providing legal advice. Sparqa Legal’s Terms of Use apply.
Marion joined Sparqa Legal as a Senior Legal Editor in 2018. She previously worked as a corporate/commercial lawyer for five years at one of New Zealand’s leading law firms, Kensington Swan (now Dentons Kensington Swan), and as an in-house legal consultant for a UK tech company. Marion regularly writes for Sparqa’s blog, contributing across its commercial, IP and health and safety law content.