Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

National living wage

National living wage: three practical scenarios for employers

by Ashok Kanani 29 Mar 2016
by Ashok Kanani 29 Mar 2016 Source: BIS
Source: BIS

The national living wage comes into effect on 1 April 2016. How well prepared is your organisation for applying rate changes when a worker moves from one rate to a higher rate band of the national minimum wage? Ashok Kanani looks at three practical scenarios.

The national minimum wage is set as an hourly rate. The rate a worker is entitled to depends on age. There is also an apprentice minimum wage. Until 31 March 2016, the highest rate applies to workers aged 21 years or over, and is £6.70 per hour.

From 1 April 2016, the rate of £7.20 per hour – the national living wage – becomes effective for workers aged 25 and over. Workers under age 25 (but 21 or over) will continue to be entitled to a minimum of £6.70 per hour.

Here, we provide three national living wage examples to help employers implement the new rate correctly.

National living wage resources

National minimum wage worked examples

National living wage survey

Letter advising a worker of a pay increase because of the introduction of the national living wage

Scenario 1: salaried employee aged 25 or over

Employer A has a worker aged 30 who is paid an annual salary of £15,126.80 for a 37.5 hour working week. The pay reference period begins each week on a Monday, and the employee is paid every Friday in cash.

The employee additionally receives accommodation, meals and pension as part of his employment package.

Does the employer need to take any action in respect of the pay for the week ending 10 April 2016?

The employer must calculate the employee’s hourly rate and ensure that it equates to at least £7.20 per hour. Benefits in kind do not count towards the national minimum wage, but an offset is given for accommodation. In this example, the employee does receive at least £7.20 an hour, and so no action is needed.

Scenario 2: salaried employee has his 21st birthday

Employer B has a worker aged 20 who will reach his 21st birthday a few days after 1 April 2016.

The employee is paid an annual salary of £11,500 by equal instalments each calendar month on the 28th. What is the minimum rate the employer must pay the employee in April 2016?

In any pay reference period, the national minimum wage rate to which the worker is entitled is the rate which applied on the first day of that period.

In this example, as the employee will reach his 21st birthday in the middle of the pay reference period, his pay need not change in April 2016. For pay reference periods beginning from 1 May 2016, the employer will have to ensure that the employee pay equates to a minimum hourly rate of £6.70.

Similarly, any worker who reaches his or her 25th birthday a few days into a pay reference period will not be entitled to the national living wage rate until the following pay reference period.

Scenario 3: Fair piece rate worker

Employer C has a worker aged 59 who works as a homeworker packaging greeting cards. He is paid on the basis of a “fair piece rate”.

The employer has already determined that an average worker completes five envelopes in an hour. In April 2016, the worker completes packaging 750 envelopes.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

OptOut
This field is for validation purposes and should be left unchanged.

From 1 April 2016, the employer must pay the employee an amount based on the national minimum wage for those of age 25 and over. Where employers pay workers based on a fair piece rate, a 20% premium is applied to the rate.

In this example, the employer must pay a minimum of £8.64 an hour and, given the output, he must be paid at least £1,296 in April.

Ashok Kanani

previous post
Fair misconduct dismissal of employee “pulling a sickie”
next post
Shared parental leave: what impact has it had?

You may also like

Next to improve wage-setting transparency after shareholder pressure

16 May 2025

Top 10 HR questions April 2025: increases to...

2 May 2025

Most businesses will need to adjust wages in...

28 Mar 2025

HR and businesses respond to Spring Statement

26 Mar 2025

April 2025: What’s coming up for HR?

21 Mar 2025

Pharmacies to work to rule over higher employment...

18 Mar 2025

CIPD calls for Employment Rights Bill clarity

6 Mar 2025

Lidl announces pay rise from March 2025

11 Feb 2025

M&S boss backs call to phase in employers’...

10 Feb 2025

Football club faces modern slavery claim

7 Feb 2025

  • 2025 Employee Communications Report PROMOTED | HR and leadership...Read more
  • The Majority of Employees Have Their Eyes on Their Next Move PROMOTED | A staggering 65%...Read more
  • Prioritising performance management: Strategies for success (webinar) WEBINAR | In today’s fast-paced...Read more
  • Self-Leadership: The Key to Successful Organisations PROMOTED | Eletive is helping businesses...Read more
  • Retaining Female Talent: Four Ways to Reduce Workplace Drop Out PROMOTED | International Women’s Day...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2025

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2025 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+