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National Minimum and Living Wage Updates: A word of warning

From April 1 2021 new rates for the National Minimum Wage (“NMW”) and the National Living Wage (“NLW”) will take effect. Chancellor Rishi Sunak commented that “taken together, these minimum wage increases will likely benefit around two million people”.

The most significant change is in relation to low paid workers, who will receive a pay rise of just under 9%, as the eligibility for the NLW is widened to include 23 and 24 year olds (instead of just those aged 25 and over). The new rates are as follows:


 Rate from April 2021 

 23 and over (NLW) 


 21 to 22


 18 to 20


 Under 18


The Low Pay Commission (an independent body that advises the Government on this topic) has recommended that employers should exercise caution in light of previous substantial breaches of the NMW rules by some large UK employers. A number of household name employers have been named by the Government for NMW underpayment over recent years. In 2019, HMRC had imposed over 1,000 penalties worth over £17 million.

According to Government commentary, one of the biggest causes of breaches are where employees were being made to cover work costs such as paying for uniform, parking fees and training. In addition, some employers failed to raise employees’ pay after they had a birthday, which consequently should have moved them into a higher NMW band.

In an aim to deter employers from succumbing to common pitfalls, the Department for Business, Energy and Industrial Strategy has published a list of the main causes of NMW underpayment, the most important include:

  1. Making wage deductions or taking payments from workers for items or expenses that are connected with the job (for example, uniform or parking costs).

  2. Failure to pay for any additional time added on to a worker’s shift, for example team handovers between shifts or time spent passing through security checks on entry and exit.

  3. Failure to pay a worker for any time during their shift when they are at the workplace and required to be available for work, (even if no work is being provided at that time during their shift).

  4. Failure to pay a worker for any travelling time or time spent carrying out training.

  5. Paying the minimum wage apprentice rate when the worker isn’t a genuine apprentice, or before a worker starts their apprenticeship or after it ends or continuing to pay the minimum wage apprentice rate to apprentices who are aged 19 years or over when they have completed the first year of their apprenticeship.

  6. Failure to apply the annual increase to minimum wage rates that come into effect on 1 April.

  7. Failure to apply the correct minimum wage rate when workers move from one age band to another at ages 18, 21 and, with effect from 1 April 2021, 23 years old.

  8. Failure to distinguish correctly between different types of worker (salaried, time, output and unmeasured).

More recently, the Supreme Court case of Royal Mencap Society v Tomlinson-Blake [UKSC 018/0160] demonstrates that ‘sleep in’ shift time is not considered to be work for the purposes of the NMW obligations. Effectively, this means that employees (usually carers) will not be entitled to receive the NMW for time that they spend asleep whilst on a shift. This mirrors a recommendation made by the Low Pay Commission that sleep-in employees/workers should only receive the NMW when they are awake and working.


It is important that employers take heed from the above, particularly given that breaches of the NMW have not only financial implications, but, and perhaps more importantly, reputational implications as well. Employers who do breach their NMW/NLW obligations will be required to pay their affected employees in arrears at the current rates, as well as paying potentially costly penalties to HMRC (of up to 200% of the total of those arrears). It is also within HMRC’s power to refer a breach to the Department of Business, Energy and Industrial Strategy who then decide whether to name (and shame) the employer publicly. An employer who breaches their NMW obligations may also face criminal sanctions, particularly where there is a public interest in prosecution. HMRC have prioritised sanction against businesses who are consistently non-compliant or uncooperative.

If you do have any concerns about the above and what it means for your business, please do get in touch with us.


This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.


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