Rates for 2017/18
On 1 April 2017 the:
- national living wage (NLW) – which is payable to workers aged 25 and over – will rise from £7.20 p.h. to £7.50 p.h.
- adult national minimum wage (NMW) rate – which applies to workers aged 21 and over but under 25 – will rise from £6.95 p.h. to £7.05 p.h.
- NMW rate payable to workers aged 18 to 20 will rise from £5.55 p.h. to £5.60 p.h.
- NMW payable to workers aged 16 to 17 will rise from £4.00 p.h. to £4.05 p.h.
- apprentice rate will rise from £3.40 p.h. to £3.50 p.h.
Whilst the general rule is that all workers are entitled to receive the NLW/NMW that’s relevant to their age, there are certain exceptions, particularly surrounding family businesses.
If you operate as a sole trader and employ one or more members of your family who also live at the family home, e.g. your spouse, son or daughter, you don’t have to pay them the NLW/NMW – the rules don’t apply.
However, if the family member lives elsewhere that exemption falls away. For example, let’s suppose your daughter works in your family shop. She needn’t receive the relevant minimum wage if she still resides at home with you but if she moves out to live with her partner she will be entitled to receive the relevant minimum wage.
Who is a family member?
A family member isn’t confined to just your spouse or children. The family business exemption can apply to any member of your family provided that they help you in the running of the family business and they live in your family home. That means the exemption could apply to parents, grandchildren, siblings, etc.
Importantly, if your family business has been incorporated and now operates as a limited company (rather than you being a sole trader), the family business exemption won’t apply at all.
Why not? That’s because the family member’s employer will be that limited company – which is a separate legal entity – not you as an individual. How you are related or where they reside is irrelevant.
Odd jobs and chores
But what if your son or daughter offers to do some chores around the family home in exchange for cash, e.g. your son offers to wash the car and/or mow the lawn. Are they entitled to receive the relevant NLW/NMW from you?
Tip. Whilst your son or daughter may not be too happy about it, this is classed as an informal arrangement. As there’s no contractual obligation, you only have to make a token payment for the chore and you can drive a hard bargain!
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