National living wage – rising wage costs for employers

Mar 31, 2017
Scott is the partner responsible for looking after the firm’s healthcare and medical sector clients. Scott also specialises in advising small businesses.
National living wage

The National Living Wage

From 1 April 2016, following the introduction of the new National Living Wage, all workers aged 25 and over are legally entitled to at least £7.20 per hour. This was, however, until the Chancellor delivered his Autumn Statement, where he announced that the National Living will increase by a further 30p from April 2017 to £7.50 per hour. The National Living Wage rates are set to increase gradually alongside rises in the National Minimum Wage, and is projected to rise to more than £9 per hour in 2020.


A four-step checklist for employers following the announcements is:

  1. Know the correct rate of pay (including the National Living Wage)
  2. Find out which staff are eligible which rates
  3. Update the company payroll and keep an eye out for future announcements
  4. Communicate the changes to staff as soon as possible

National Minimum Wage

The government announced increases to the National Minimum Wage which came into effect on 1 October 2016, after accepting recommendations for the new rates from the Low Pay Commission (LPC).


  Current rate Rate from 1 April
Over 25 £7.20 £7.50
21-24 year olds £6.95 £7.05
18-20 year olds £5.55 £5.60
16-17 year olds £4.00 £4.05
Apprentice rate* £3.40 £3.50

*This apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

The table below shows the historic wage increases for the National Minimum Wage:

Year 21 and over 18-20 Under 18 Apprentice
2015 £6.70 £5.30 £3.87 £3.30
2014 £6.50 £5.13 £3.79 £2.73
2013 £6.31 £5.03 £3.72 £2.68

Moving forward – more compliance for employers

National Minimum Wage and National Living Wage rates will now change every April, as opposed to every October and April respectively.

This is a positive change, but does mean that the above current rates will only be effective up until 31 March 2017.

Following the introduction of the new National Living Wage in April 2016, and the imminent increase of the NLW, this will see be the fifth round of wage increases (in some form) in just two years. It is therefore unsurprising to see that many small (and indeed large) business owners are finding running their payroll an increasingly complex and time-consuming task. The compliance obligation on employers has never been greater and there has never been a better time to consider outsourcing your payroll.


HMRC have also recently published ten of the most bizarre excuses used by employers to try and avoid paying the NMW. The published to aid a new awareness campaign to encourage workers to check their pay to ensure they are earning the legal minimum for their age, ahead of the increase on 1st April 2017.

The top ten excuses are:


  1. The employee wasn’t a good worker so I didn’t think they deserved to be paid the National Minimum Wage.
  2. It’s part of UK culture not to pay young workers for the first 3 months as they have to prove their ‘worth’ first.
  3. I thought it was ok to pay foreign workers below the National Minimum Wage as they aren’t British and therefore don’t have the right to be paid it.
  4. She doesn’t deserve the National Minimum Wage because she only makes the teas and sweeps the floors.
  5. I’ve got an agreement with my workers that I won’t pay them the National Minimum Wage; they understand and they even signed a contract to this effect.
  6. My accountant and I speak a different language – he doesn’t understand me and that’s why he doesn’t pay my workers the correct wages.
  7. My workers like to think of themselves as being self-employed and the National Minimum Wage doesn’t apply to people who work for themselves.
  8. My workers are often just on standby when there are no customers in the shop; I only pay them for when they’re actually serving someone.
  9. My employee is still learning so they aren’t entitled to the National Minimum Wage.
  10. The National Minimum Wage doesn’t apply to my business.

Scott Sanderson

Scott Sanderson, Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on or 0114 266 7141.[/author_info]