Changes to National Minimum Wage

Increases to the hourly minimum wage took effect on 1 October 2008. The new rates are as follows:

• Standard (adult) rate:              £5.73
• Development rate:                   £4.77
• Young workers rate:                £3.53
• Accommodation offset rate:   £4.46

The policy behind the national minimum wage is that workers should receive cash rather than benefits in kind. The only exception to this is where an employer provides a worker with accommodation. The cost of that accommodation can count in part towards the employer’s liability to pay the national minimum wage, but there is a limit of £4.30 per day which may be offset.

Currently tips, service charges and gratuities can be taken into account when they have been paid by the employer through its payroll. They should not be taken into account where:

• They are paid by customers directly to workers.
• They are collected, for example, by a head waiter and distributed to workers.

However, the position is likely to change following a Government announcement that it plans to change the law so that tips, gratuities and service charges can no longer be taken into account when deciding if a worker has received the national minimum wage. Guidance for both workers and employers will be issued following a period of consultation this autumn. The change is anticipated to come into effect in 2009.

Carol Shaw
Partner