Does an employer risk age discrimination if it pays different rates in line with the national minimum wage age bands?

From 1 April 2022, the national minimum wage rate for workers aged 23 and over is £9.50 per hour (the national living wage). Lower minimum wage rates apply to workers who are aged at least 21 but under 23; at least 18 but under 21; and under 18 and no longer of compulsory school age (there is a separate rate for apprentices aged under 19 or in the first 12 months of their apprenticeship).

The Equality Act 2010 includes an exception that states that it is not unlawful age discrimination to pay workers of different ages at different rates if the pay structure is based on the age bands set out in the national minimum wage legislation.

As a result of the exception, an employer can pay a younger worker at a lower rate than an older worker, so long as the minimum wage rate for the younger worker is lower than that for the older worker, and the younger worker is paid less than the highest rate of the minimum wage (ie £9.50, the national living wage rate).

So, for example, an employer could pay a 27-year-old £9.80 an hour, while paying a 22-year-old £9.20 an hour, as the 22-year-old is in a lower minimum wage age band and is paid less than £9.50 an hour. However, the exception would not cover payment of £9.60 for the 22-year-old, as this does not fulfil the criterion of being lower than the highest rate of the national minimum wage.

The exception does not cover different pay rates for workers within the same minimum wage age band, which would have to be objectively justified.

An employer would be at risk of an age discrimination claim if it based recruitment or redundancy decisions on age, for example by rejecting applicants aged 23 and over with the aim of avoiding paying the national living wage.