Source: Croner-i Ltd
2024 is set to be a busy year for employers and their HR teams, with various new employment laws set to come into force. And with the Government’s announcement of the new National Minimum and Living Wage (NMW/NLW) rates, applicable from 1 April 2024, along with new rights to paid leave (neonatal care leave) and the requirement to hand over 100% of tips and gratuities to employees, it’s going to be an expensive one too. In this article, Stacie Cheadle, Croner-i employment law researcher and writer, looks at the NMW/NLW rate increases for next year and sets out our top tips for managing minimum wage.
Background
On 21 November 2023, the Government announced the biggest ever increase to the NLW, worth over £1800 a year for a full-time worker, or just under 10%. This fulfils the Government’s manifesto pledge to lift the NLW to two-thirds of median earnings by 2024. Since it was first introduced in 2016, the NLW will have doubled in cash terms from around £10,500 to nearly £21,000 a year for a full-time worker. With the latest rate increase from 1 April 2024, for the first time, 21-year-olds on the NLW will always earn two-thirds of average earnings.
The other big news announced was that eligibility for the NLW will also be extended by reducing the age threshold to include 21-year-olds. This means that a 21-year-old will get a 12.4% increase between March 2024 and April 2024, when their pay will go from £10.18 to £11.44 an hour, which is worth almost £2300 a year for a full-time worker. The Department for Business and Trade estimates 2.7 million workers will directly benefit from the 2024 NLW increase.
The increases are as follows:
| Age Band | Rate from 1 April 2023 (per hour) | Rate from 1 April 2024 (per hour) |
| 23 and over (NLW) | 10.42 | |
| 21–22 | 10.18 | |
| 21 and over (expanded NLW band) | – | 11.44 |
| 18–20 (NMW) | 7.49 | 8.60 |
| 16–17 (over school leaving age) | 5.28 | 6.40 |
| Apprentices under 19, or over 19 and in the first year of the apprenticeship | 5.28 | 6.40 |
Below, we look at some of the difficult questions that can arise around minimum wage and share our top tips for dealing with them.
Do trial shifts need to be paid NMW?
It will depend on the nature of the trial as to whether or not it will attract the requirement to pay NMW/NLW. When the applicant is asked to perform tasks during a trial that would otherwise be done by an existing employee, which provides a benefit to the business, then this will be classed as work for the purposes of the NMW and they should be paid at least the relevant rate for their age for that time.
On the other hand, they may be asked to perform a task purely as a test, such as reviewing a document for errors or cooking a meal. Where this is the case, the applicant will not be entitled to any pay for that time.
Do employees have the right of access to their minimum wage records?
Employers are legally required to keep sufficient records to show that they are meeting their NMW obligations. Where a worker has reasonable grounds to think that their wages have fallen below the NMW, then they have the right to require their employer to produce any relevant records. As part of this right, they are also able to inspect and examine those records and copy any part of them. Whilst doing so, they are entitled to be accompanied.
To exercise these rights, the worker must give their employer a “production notice” requesting the production of any relevant records relating to a specified pay reference period(s). Upon receipt of such a request and within 14 days, the employer will need to give the worker reasonable notice of a place and time where the records will be provided which must be at one of the following:
- the worker’s place of work
- a place which is reasonable for the worker to attend
- a place agreed between the worker and the employer.
Where an employer fails to produce all or some of the records or to allow the worker to inspect and examine them, and be accompanied in doing so, the worker can bring an employment tribunal claim. The award for such a claim is a sum equal to 80 times the hourly amount of NMW in force at the time of the award.
When do the increased NMW rates need to start being paid?
The increase doesn’t necessarily have to be on 1 April, which is when the new rates are effective from. The new, higher rates will need to be paid from the start of the first pay reference period after 1 April. So, if the pay month runs from the 15th of each month, the increased rates don’t have to be applied until 15 April.
Where an employer pays wages according to the number of items that a worker produces (piecework), how must the minimum wage be calculated?
Where a worker is paid according to the number of items that they produce (or the number of sales or deals that they make), this is referred to as “output work”, also commonly known as “piecework”. The employer can opt either to pay each employee the minimum wage for every hour actually worked or alternatively operate a “fair piece rate” system.
To establish a “fair piece rate” (known as rated output work), the employer must first carry out a fair test of a representative sample of the workforce to determine the average number of items that an average worker can produce in an hour. The employer must then:
- calculate the number of hours that an average worker takes to produce a pre-determined number of items
- multiply this number of hours by 120%, which establishes the “deemed number” of hours
- multiply the deemed number of hours by the appropriate minimum wage and divide the resultant number by the number of items identified as the average number that an average worker can produce in one hour.