Calculating the National Living Wage

The National Living Wage is a new National Minimum Wage level in all but name. It applies to those who are age 25 and over. As it is a higher rate you may need to check that you will be paying it.

Many of the employers caught out by HMRC for failure to pay the National Minimum Wage thought that they were paying the correct rate. They just hadn’t calculated what they were paying correctly and HMRC won’t help.

In most cases all you need to do is calculate the amount of money paid to each employee in the pay period, that period relates to how the employee is paid: weekly, monthly, or four-weekly.

Then calculate the hours that each employee has worked in the pay period that you use. Remember all hours that are worked, at your request, count. That includes travel between jobs within the working day and, if an employee is allowed to sleep while at work then you need to include those hours too. Then divide the pay by the hours. This is the rate that is important.

The premium part of the overtime pay does not count.

Of course, there is often devil in the details so if you are paying employees at or near the NLW then it is worth checking further especially if there are special circumstances apply to your employees. There is an online checker here. If you have any further doubts, please contact us.

We have a further blog on how you might be able to afford to pay the NLW, here.

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