The new national minimum wage rates which will apply from October have been announced.

National Minimum Wage

From 1 October 2016 the rates for the national minimum wage will rise as follows (figures in brackets show the current rate):

Workers aged 21 to 24 over: £6.95 (£6.70*)

Workers aged 18 to 20: £5.55 (£5.30)

Young workers aged under 19 but above compulsory school age who are not apprentices: £4.00 (£3.87)

Apprenticeship rate: £3.40 (£3.30)

* Until 1 April 2016 the adult rate applies to all workers aged 21 and over.

National Living Wage

Note that from 1 April 2016, the new national living wage for workers aged 25 and over will come into force at a rate of £7.20 an hour. This rate will not change in October 2016 for those aged 25 and over. This means that the new adult rate of £6.95 will only apply to workers aged 21 to 24 inclusive from that date.

From April 2017 all national minimum wage rates including the national living wage will be uprated at the same time.

Penalties

Employers need to ensure that they comply with the new rates as the penalties for failure to do so are also increasing. Many examples of non-compliance are not intentional but occur as a result of administrative failings. For example, employers need to make sure they have the correct systems in place to identify when workers move from one rate to another.

Penalties will increase from 100% of arrears to 200% of arrears (but will be halved if employers pay within 14 days). The overall maximum penalty of £20,000 per worker will remain unchanged.

The increase in minimum wage will also increase other costs such as pension contributions and national insurance contributions so organisations need to factor these into budgets for the coming year.