The National Minimum Wage sets minimum hourly rates that you must pay your employees. Although business groups had pushed for the minimum wage to remain at current levels given the economic climate, the increase suggested by the Government is smaller than usual to take account of the economic conditions. As of 1 October 2009, the National Minimum Wage (NMW) rate will increase to the following amounts:

• £5.80 to workers aged 22 years or above

• £4.83 to workers aged between 18 and 21 years

• £3.57 to workers aged between 16 and 17 years

NB : Employers should also take into consideration that an extension of the adult rate to 21 years or above is currently under consideration and is likely to take effect from October 2010.

Tips and gratuities

As of 1 October 2009, it will no longer be legal for employers to use tips, service charges and gratuities paid to employees via payroll to top up wages to meet the NMW. This effectively means that service industries will have to pay salaries in full and National Insurance Contributions on the whole amount paid to the employee.

The new law which prohibits tips from “topping up” salaries has left a few questions unanswered in regards to customers knowing where their tips are now going and what happens if a tip is included on a credit card? The government proposes to publish a new Code of Practice to accompany the new legislation, to help clarify the situation and those in the service industry should look out for its publication at a future date.

Weekly pay limit

The limit on a week's pay – used to calculate statutory redundancy payments – will rise from £350 to £380 where the event giving rise to compensation or payment occurs on or after 1 October 2009.

This increase will also affect other statutory compensation payments including: -

• compensation for non-compliance with flexible working procedures

• the basic and additional awards for unfair dismissal

• compensation where an employer has failed to consult a trade union or elected employee representatives when it intends to make 20 or more employees redundant

• compensation for failure by an employer to allow an employee to be accompanied to a disciplinary or grievance hearing

• compensation for failure by an employer to give a statement of employment particulars

• compensation for an employer's failure to comply with its duty to notify an employee of either the date on which it intends to retire them or their right to make a request not to retire on that date.

NB : The weekly pay limit usually increases each February in line with the Retail Prices Index. As this change is taking place in October, there will no increase in the limit in February 2010 but it will increase again in February 2011.