Young Worker Age Related Minimum Wage RatesFriday, September 3rd, 2010
From October 2010, the adult rate of the National Minimum Wage (NMW) applies to workers from age 21, instead of 22. The obvious effect of this change is that, from October, workers aged 21, who must currently be paid not less than £4.83 per hour, will have to be paid at least £5.93 per hour.
Another, less obvious, effect of this change is its impact on the use of age-related pay rates for young workers. All employers with “junior rates” that provide stepped increases from school-leaving age upwards must review the structure to ensure that it complies with the requirements of what is now the Equality Act 2010, Schedule 9, paragraph 11 The national minimum wage: young workers.
The requirements were originally introduced, from 1 October 2006, by means of the Employment Equality (Age) Regulations 2006 and the Employment Equality (Age) Regulations (Northern Ireland) 2006. In principle, the payment of different rates of pay, as regulated by the National Minimum Wage, amounts to discrimination on the grounds of age. To make it legally possible for employers use age-related rates, whether the NMW rates or their own occupational rates, an exception for young workers was included in the Regulations. The exception provides that an employer may only use occupational age-related wage bands if the structure is based strictly on the NMW wage bands. In effect, differences in pay rates may not be based on age unless their only purpose is to comply with the NMW pay rate structure.
The exception only applies to workers to whom the NMW rules apply. Where Worker A and Worker B both qualify for the NMW at the relevant hourly rate and B is older than A, A may only be paid at a lower rate of pay than B if:
- the NMW rate that applies to a person of A’s age is less than the rate that applies to a person of B’s age, and
- A’s hourly rate is less than the current adult NMW hourly rate.
In other words, employers may apply different wage rates to employees of different ages, as long as
- the same age bands are used as those set for the NMW, namely (from October 2010)
- over school-leaving age and under 18
- 18 to 20
- 21 and over, and
- the lower of the two rates is less than the current adult NMW.
Any other junior rate structure does not meet the conditions and is, as a result, discriminatory on the grounds of age, unless the differences can be justified objectively. In order to comply with the Equality rules, employers whose age-related pay structure does meet the conditions have only to reduce the age from which their adult workers are paid from 22 to 21.