UK: Difference between the National Minimum Wage and the National Living Wage in the UK

As an employer, you must understand the National Minimum Wage and the National Living Wage. It is a legal requirement to pay these where your employee or workers qualify for them. Not doing so results in substantial penalties such as a fine or criminal conviction. However, the National Minimum Wage and the National Living Wage are two different terms. Notably, one will apply to some of your workers and employees, and the other will apply to others. Therefore, you must understand any difference between the two. This article will explain the difference between the National Minimum Wage and the National Living Wage.

What is the National Minimum Wage?

As an employer, you are under a legal obligation to pay your workers the average minimum wage per hour. Importantly, the size of your business is irrelevant. Where your employee is of school-leaving age and under 23 years old or classed as an apprentice, you must pay them the National Minimum Wage.

School leaving age is the last Friday in June of the year a worker turns 16 years old, before the end of the year's school summer holiday.

The National Minimum Wage applies to all workers and employees regardless of working hours. It also applies, for example, to workers and employees training on the job, on probation, working from home and agency workers.

Notably, there are circumstances where the National Minimum Wage does not apply. For example, it does not apply to:

• those who choose to be self-employed;
• those who choose to work as volunteers;
• company directors;
• members of the armed services;
• those carrying out work experience as part of a course;
• people who are work shadowing; and
• those who have not reached school leaving age.

The Current Rate

The National Minimum Wage varies slightly according to the age of the person working for you. This table shows you the current rates of the National Minimum Wage according to the worker's age, which applies from 1 April 2022 to 31 March 2023.

The Government reviews the National Minimum Wage rate every year, with changes taking place in April each year. The Low Pay Commission is the independent body that completes the review.

Additionally, the apprentice rate only applies to apprentices under the age of 19 or those over 19 but currently in their first year of the apprenticeship. A person aged 19 years or over who has finished the first year of their apprenticeship should receive the National Minimum Wage that applies to their age.

What is the National Living Wage?

Like the National Minimum Wage, paying the National Living Wage is a legal obligation for employers. So, you must pay your staff a minimum average hourly wage no matter the size of your business.

However, it only applies to those aged 23 years and over. From April 2021, those who qualify for the National Living Wage must be 23 years and over, as opposed to the previous qualification of being over 25 years old. Therefore, the National Living Wage is the highest rate for the National Minimum Wage.

The National Living Wage applies to all your workers and employees in the same way that the National Minimum Wage does. However, similar to the National Minimum Wage, the National Living Wage does not apply to certain workers.

The current rate for the National Living Wage is £9.50 per hour. Similar to the National Minimum Wage, the National Living Wage is reviewed yearly by the Government. Changes to the National Living Wage rate occur in April each year alongside the National Minimum Wage changes.

National Minimum Wage vs National Living Wage

Whilst the National Minimum Wage and the National Living Wage are two different terms, there are few differences between the two. Much of what applies to one also applies to the other. The following are the key differences between the National Minimum Wage and the National Living Wage:

• the National Minimum Wage applies to those under 23 years old but who are over school leaving age as well as those who are apprentices. However, the National Living Wage applies to those aged 23 years old and above;
• the National Minimum Wage consists of three different amounts, but the National Living Wage is one set amount; and
• the National Minimum Wage varies according to the age of the worker or employee and the apprenticeship stage. However, the National Living Wage does not change according to the worker's age or employee.

Key Takeaways

Paying the National Minimum Wage and the National Living Wage to your employees and workers where they qualify for it is a legal duty. If you fail to correctly pay either the National Minimum Wage or the National Living Wage, HMRC can issue you a fine. Likewise, you risk the court charging you with a criminal conviction. Whilst the National Minimum Wage and the National Living Wage are two different terms, there are a few differences between the two. Both apply to almost all workers and employees.