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New Minimum Wage increases moving from October yearly updates to April

At Budget 2016, the then chancellor announced that increases to the National Minimum Wage and National Living Wage would be aligned from April 2017.

This corrects the anomaly in 2016 that led to the National Living Wage being effective April 2016 and the National Minimum Wage being effective October 2016.

The National Minimum Wage (Amendment) Regulations 2017 are effective 1 April 2017 and amend the hourly rates as follows:

•   Adult age 25+ to £7.50 (from £7.20). This is the National Living Wage
•   Adult 21-24 to £7.05 (from £6.95)
•   Youth Development 18-20 to £5.60 (from £5.55)
•   16-17 workers to £4.05 (from £4)
•   Apprentice rate to £3.50 (from £3.40)
•   Accommodation offset rate to £6.40 per day (from £6)

Note that the apprentice rate applies to apprentices under 19 and those aged 19 or over who are in their first year.

As to when the new rates are effective, there is no change in that regard and it’s all to do with when the pay reference period started and the age of the employee at the start of it. The new rates are effective for the first full pay reference period that starts on or after 1 April 2017. So, for example:

•   A worker is paid monthly and is paid at the end of April for the period 1 to 30 April. She turns 25 on 2 April. The statutory obligation is for her to be paid at least £6.95 per hour for that pay reference period and she must be paid to £7.50 per hour from the start of the next pay reference period on 1 May.
•   A worker is 25 and paid weekly on 7 April for the week that started 27 March and ended 2 April. To meet the statutory obligations, the employee must be paid at least £7.20 per hour on 7 April. The first full pay reference period on or after 1 April does not start until 3 April 2017; therefore, the following week’s payment on the 14th must be paid at a rate of at least £7.50 per hour.

Of course, it is possible to pay the new rates from 1 April or from the time that a worker moves from one age band to another. This may mean having to do pro-rata calculations. However, there is no statutory obligation to do so. However, if the employer has always done this in previous years, it would probably be best to continue with this for fear of breaking a regime that has become custom and practice.