The level at which the National Minimum Wage (NMW) is set has always been a contentious political issue, and that is set to continue with the UK Government’s commitment to introduce a National Living Wage (NLW).          

The Scottish Government has expressed its disappointment at the NLW proposals. It argues that the term NLW is not a “living wage” and should not be referred to as such. It considers the NLW simply to be an enhancement of the NMW which “disgracefully discriminates against the under 25s”.      

The question of whether or not the NLW discriminates against those under 25 is for another blog but the Government will know now that it needs a legitimate aim in order to objectively justify this measure.  

The aim of this blog is to clarify the important distinction between the NMW and the NLW.

The terms are often used interchangeably which can cause confusion. It gets even more complicated when reference is made to the Living Wage, which is a higher, voluntary rate of pay. The Scottish Government advocates a Living Wage of £7.85 per hour and encourages businesses to sign up to a voluntary accreditation scheme although a move to make the Living Wage a requirement of all public sector contracts was defeated.

In July’s budget, Chancellor Osborne announced a compulsory NLW of £7.20 per hour for employees aged 25 and over. The NLW will apply from April 2016 and the UK Government expects the rate to rise to over £9 by 2020.

Wages for employees under 25 will continue under the NMW rates.    

The following new minimum wage rates took effect on 1 October 2015 –

  • £6.70 per hour for workers aged 21 and over
  • £5.30 per hour for those aged 18 to 20
  • £3.87 per hour for those aged 16 to 17
  • £3.30 per hour for apprentices under 19, or over 19 and in the first year of the apprenticeship

The important message to take from this blog is that the NMW and the NLW are different. The NMW is the legal minimum that employers must currently pay employees in order to comply with the law. The NLW will increase that legal minimum for employees aged 25 and over. The political debate over whether or not use of the NLW term is appropriate will continue.