The national living wage is the new statutory national minimum wage rate that must be paid to workers aged 25 and over. From 1st April 2016, the rate of the national living wage will initially be £7.20 per hour.  If an underpayment of the national minimum wage is identified by HM Revenue and Customs (HMRC), tough financial penalties are likely to be incurred by employers.

This guide takes a closer look at the national living wage in terms of implementation and compliance.

1.  What payments are included as part of the national living wage?  Gross pay, including any bonus, commission or other incentive pay received over the pay reference period (for example one month if the worker is paid monthly).  The following payments should not be included:

  • Overtime and shift payments
  • Tips, gratuities and cover charges
  • Loans and advances of wages by the employer
  • Employer pension payments
  • Benefits in kind
  • Repayments of expenses

2.  Do employers have to pay the national living wage from 1st April 2016, even if their payroll period is part way through the month?  No.  If an employer’s payroll period begins on, for example, 15th April 2016, the national living wage rate will apply from that date.  Reason being, is that this date is the first pay reference period that falls on or after 1st April 2016.

3.  Is a worker entitled to the national living wage from his/her 25th birthday?  Entitlement to the national living wage rate begins from the start of the first pay reference period that begins on or after his/ her 25th birthday.

4. Are apprentices entitled to the national living wage?  If an apprentice is 25 years of age or over and is not in the first 12 months of their apprenticeship, he or she will be entitled to the national living wage. There is an alternative national minimum wage rate for apprentices who are aged under 19 or in the first 12 months of their apprenticeship.

5.  Will the national living wage increase each year?  Yes, this rate will likely increase each April.  The Government are aiming for the national living wage to reach 60% of median earnings by 2020, which would equate to approximately £9 per hour.

For more information, contact Ramshaw HR @


By Bruce Ramshaw

Principal Consultant

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