National Living Wage: The impact and how to deal with the self-employed

Does the national living wage affect me?​

Q: There has been a lot in the press recently about the national living wage. I employ a number of staff in my pub who are over the age of 25 and I am wondering how this will impact on my business?​​

A:​ The national living wage (NLW) comes into effect from 1 April 2016 and means that you will have to pay any member of staff aged 25 years or older £7.20 per hour.

The new regulations do not only impact on the rate of pay for the over-25s because the age brackets for the national minimum wage (NMW) will change (although the rates of pay will not). The new age brackets for NMW from 1 April 2016 are:

• Age 21-24: £6.70 per hour (PH)
• Age 18-20: £5.30 PH
• Age under 18: £3.87 PH
• Different rules apply to apprentices

While these are the current rates payable, keep an eye out for changes to both the NLW and the NMW.

The intention is that the NLW will exceed £9 by 2020 and, normally, the NMW is increased in October each year (the above rates have been in force since October 2015).

If you, as an employer, do not comply, you could face a fine of up to £20,000 per employee and potentially have to pay them 200% of the arrears owed.
You should, therefore, ensure you have put in place the required measures so that the changes are reflected in your employees’ April pay packets.

Changes to wages for the self-employed​

Q: A number of the people who work at my pub are self-employed. Do I still need to ensure that their pay is equivalent to either the NLW or the NMW (depending on their age)?​​

A: ​It is quite possible that some staff, such as cleaners and door supervisors, may be contracted to you on a self-employed basis and so are not ‘employed’ by you.

If someone is self-employed, you would not need to ensure that they are paid either the NLW or the NMW.

To establish if a staff member is self-employed, there are numerous factors that could be considered, but it is likely that if the following are true then they are self-employed:

• They are not under direct supervision when working
• They provide an invoice to you for charges in respect of work carried out
• They pay their own national insurance and tax
• They do not get holiday or sick pay when they are not in work
• They operate under a contract

However, if you are unsure, you can contact HMRC.