An Act to make provision for and in connection with a national minimum wage; to provide for the amendment of certain enactments relating to the remuneration of persons employed in agriculture; and for connected purposes.
The National Minimum Wage Act 1998 creates a minimum wage across the United Kingdom.[2] From 1 April 2023, the minimum wage is £10.42 for people aged 23 and over, £10.18 for 21- to 22-year-olds, £7.49 for 18- to 20-year-olds, and £5.28 for people under 18 and apprentices.[3] (See Current and past rates.)
It was a flagship policy of the Labour Party in the UK during their successful 1997 general election campaign.[2] The national minimum wage (NMW) took effect on 1 April 1999. On 1 April 2016, an amendment to the act attempted an obligatory "National Living Wage" for workers over 25 (now extended to workers aged 23 and over), which was implemented at a significantly higher minimum wage rate of £7.20. This was expected to rise to at least £9 per hour by 2020,[4] but in reality by that year it had only reached £8.72 per hour.[5]
Background
No national minimum wage existed prior to 1998, although there were a variety of systems of wage controls focused on specific industries under the Trade Boards Act 1909. The Wages Councils Act 1945 and subsequent acts applied sectoral minimum wages. These were gradually dismantled until the Trade Union Reform and Employment Rights Act 1993 abolished the 26 final wages councils, which had protected around 2,500,000 low-paid workers.
Much of the Labour Party had long opposed a government minimum wage because they feared that would reduce the need for joining trade unions,[citation needed] which they supported. Also, they feared that the minimum wage would in practice become the maximum wage since employers would be satisfied with paying only that amount.[citation needed]
Part of the reason for the shift in Labour's minimum wage policy was the decline of trade union membership over recent decades (weakening employees' bargaining power),[2] as well as a recognition that the employees most vulnerable to low pay, especially in service industries, were rarely unionised in the first place. Labour had returned to government in 1997 after 18 years in opposition, and a minimum wage had been a party policy since as far back as 1986, under the leadership of Neil Kinnock.[6]
£5.28 per hour for apprentices in their first year or under 19 years old
In his 2015 budget, George Osborne announced that from 1 April 2016, a further rate known as the "National Living Wage" ("NLW") will apply to those aged 25 or over and will be at the rate of £7.20 per hour. This was successfully introduced into legislation.[10] As of April 2022 this rate is £9.50 per hour and the minimum
age threshold was decreased to 23 in April 2021.
In November 2023, Jeremy Hunt announced that all workers over 21 would receive the National Living Wage of £11.44 per hour from April 2024 onwards. [11]
'Adult rate' is for employees aged 21 and over from 2010, and 22 and over prior to then.
'Development rate' is for employees aged 18–20 from 2010, and 18–21 prior to then.
'16–17 year olds rate' was introduced in 2004; prior to that there was no minimum wage at this age.
'Apprentice rate' was introduced in 2010.
'National Living Wage' was introduced in April 2016, and applies to employees aged 25 and over.
The National Minimum Wage Act 1998 applies to workers (section 1(2)), that is, employees, and anyone who has a contract to do work personally, other than for a customer or a client (section 54(3)). Those working through agencies are included (section 34), so that the agencies' charges must not reduce a worker's basic entitlement. Home-workers are also included, and the Secretary of State can make order for other inclusions. The Secretary of State can also make exclusions, as has been done for au pairs and family members in a family business. Share fishermen paid by a share of profits are excluded, as are unpaid volunteers and prisoners (sections 43–45).
The hours that are used in a national minimum wage calculation are dependent upon work type as defined within the National Minimum Wage Regulations 1999.[12] The different work types are time work, salaried hours work, output work and unmeasured work. Hours to be paid for are those worked in the "pay reference period", but where pay is not contractually referable to hours, such as pay by output, then the time actually worked must be ascertained. The principle is that the rate of pay for hours worked should not fall below the minimum. Periods when the worker is on industrial action, travelling to and from work and absent are excluded. A worker who is required to be awake and available for work must receive the minimum rate. This does not prevent the use of "zero hour contracts", where the worker is guaranteed no hours and is under no obligation to work.
Workers' rights
Section 10 permits a worker to issue a "production notice" to their employer requesting access to the employer's records if they believe that their pay may be, or have been, below the national minimum wage.[13]
Enforcement
The NMW is enforceable by HMRC (section 14), or by the worker making a contractual claim or through a "wrongful deduction" claim under Part II of the Employment Rights Act 1996. Section 18 provides for compensation. Employers must not subject their workers to dismissal or any other detriment (section 25 and section 23).
Failure to pay underpayments after issue of a notice of underpayment results in payment of a financial penalty to the Secretary of State.[20] In 2016, arrangements were made to ensure that underpayments result in double-level financial penalty.[21] The Low Pay Commission has highlighted that apprentices are particularly exposed to being underpaid.[22]
Spackman v LMU [2007] IRLR 741, entitlement to payment of wages
Statistics
Comparisons of the changes in the National Minimum Wage to average earnings and inflation. The minimum wage has grown well ahead of both.
The Office for National Statistics produces information about the lower end of the earnings distribution and estimates for the number of jobs paid below the national minimum wage.[23] The figures are based on data from the Annual Survey of Hours and Earnings.
Perspectives
The policy was opposed by the Conservative Party at the time of implementation, who argued that it would create extra costs for businesses and would cause unemployment. In 1996, The Conservative Party's future leader, David Cameron, standing as a prospective Member of Parliament for Stafford, had said that the minimum wage "would send unemployment straight back up".[24] However, in 2005 Cameron stated that: "I think the minimum wage has been a success, yes. It turned out much better than many people expected, including the CBI."[25] It is now Conservative Party policy to support the minimum wage.[26]
While Mayor of London, Boris Johnson, future Conservative Prime Minister, supported the London living wage, ensuring that all City Hall employees and subcontracted workers earn at least £7.60 an hour and promoting the wage to employers across the city. In May 2009, his Greater London Authority Economics unit raised the London Living Wage for City Hall employees to its current rate of £7.60, £1.80 more than the legal minimum rate of £5.80.[27]
To put the pay in an annual perspective, an adult over the age of 25 working at the minimum wage for 7.5 hours a day, 5 days a week, will make £1,417/month and £17,004/year Gross Income. After pay-as-you-earn tax (PAYE) this becomes £1266.89/month or £15,202.72/year (2019/2020).[28][29] Full-time workers are also entitled to a minimum of 5.6 weeks paid holiday per year from 1 April 2009, with pro-rata equivalent for part-time workers. This includes public holidays.[30]
At the September 2021 Labour Party Conference, Labour Party members voted in favour of a £15 an hour minimum wage.[31] The motion calling for a £15 an hour minimum wage was put forward by the Unite union.[31] Labour Party leader Keir Starmer and his leadership team did not indicate a preference either in favour or against the motion.[31] Though it is thought that Starmer is unlikely to adopt the policy.[32] Organisations who support a £15 an hour minimum wage include: the Green Party of England and Wales,[33] the Bakers, Food and Allied Workers' Union (BFAWU),[34] the Trades Union Congress,[35] and the GMB trade union, who call for "the National Minimum Wage to be replaced with a Real Living Wage rate" at £15 for all ages.[36]
^Partington, Richard; Butler, Sarah (29 September 2021). "£15 UK minimum wage may not be the best way to tackle poverty". The Guardian. Retrieved 13 December 2023. Labour members on Tuesday backed a £15-an-hour minimum wage at their annual party conference in Brighton. Although the vote was not binding and the policy is unlikely to be adopted by Keir Starmer [...]
^"Fight for £15". Trades Union Congress. Retrieved 13 December 2023.
^"Low Pay Commission Consultation on the National Minimum Wage 2023"(PDF). gmb.org.uk. GMB (trade union). June 2022. Retrieved 13 December 2023. GMB has consistently called for the National Minimum Wage to be replaced with a Real Living Wage rate. GMB believes that a Real Living Wage should now be at least £15 an hour, and should apply to workers of all ages as we have continually called for.
^Low Pay Commission. Home page. Retrieved on 1 October 2014.
