On 1st April, the new National Living Wage (NLW) came into force. This meant an increase in the minimum wage for workers aged 25 and over of 50p. Millions of workers are set to see their pay increase as a result of this change, according to figures from the Treasury.
What is the Living Wage?
From a practical standpoint, the Living Wage is effectively an increase in the national minimum wage for eligible workers. It is set apart from any other minimum wage increase primarily by the fact that it has been specifically designed, in response to various campaigns, to ensure that those working full time on the minimum wage will earn enough money to support a reasonable standard of living.
Workers younger than 25 will still be subject to the minimum wage and will find this unchanged by the introduction of the NLW, as will those in the first year of an apprenticeship. Workers over 25 will receive a 50p premium on top of the standard minimum wage, increasing the minimum gross hourly wage they are entitled to from £6.70 to £7.20.
Deductions, Tips and Benefits
Workers who receive tips, service charges, or gratuity payments are not exempt from the new Living Wage. They must still receive a basic rate of pay that meets the minimum, with no deductions made on the basis of tips and gratuities that they receive on top.
No deductions can be made from the NLW for expenses that have been met by the employer if those expenses are necessary for the work being carried out. If uniforms, specialist clothing, or tools, for example, are required and are supplied by the employer, this is not grounds to make deductions from wages that take the overall rate below the NLW.
Some employee benefits can be deducted from NLW rates of pay, however, so that the benefit in question is effectively being provided in lieu of a portion of the employee's pay. Most notably, this could be the case where an employer is providing accommodation. The deduction cannot exceed the accommodation offset rate, which is currently £5.35 per day, unless total pay after the deduction would still exceed the Living Wage.
Travel and Expenses
The law does not compel employers to make separate payments for on-the-job travel to minimum wage workers; the minimum wage still applies to all hours worked including travel time. This includes travel made in connection with or while carrying out work, but not travel to and from a place of work at the start and end of a shift.
Workers are also entitled to earn a wage which remains compliant with the minimum wage and the new NLW rules when out-of-pocket expenses are accounted for. This includes things like vehicle mileage and any other expenses incurred in the course of work which a worker must initially meet out of their own, personal supply of funds.
