National Living Wage increases. Be prepared and plan
The UK Government has announced the annual increases in the National Minimum Wage (NMW) and National Living Wage (NLW) that will apply from April 2022.
All workers are legally entitled to be paid the National Minimum Wage (NMW). This includes temporary seasonal staff, who often work short-term contracts in bars, hotels, shops and warehouses over the summer or other periods. Employers who fail to pay the correct wage will be subjected to a penalty fine and may be named by the Government.
When it is introduced in April, the new National Living Wage (NLW) for over-23s will be £9.50 an hour. This is a 6.6% uplift on the previous rate and equates to a salary increase of approximately £1000 pa. for someone working full time.
In full, the new rates that will apply from 1 April 2022 are:
- National Living Wage (23+) to increase from £8.91 to £9.50
- National Minimum Wage (21-22) to increase from £8.36 to £9.18
- National Minimum Wage (18-20) to increase £6.56 to £6.83
- National Minimum Wage (16-17) to increase £4.62 to £4.81
- Apprenticeship Wage to increase from £4.30 to £4.81
The large increase of 9.8% in the rate payable to 21-22 year olds is because the Low Pay Commission has recommended that they should be paid the National Living Wage by 2024. The government’s aim is to phase increases in such a way as to avoid a single large increase for them in 2024.
HMRC have recently updated their factsheets on the NMW and NLW. These can be found here on the GOV.UK website.
All businesses must therefore prepare for this change. And it’s worth remembering that an increase to the National Minimum Wage means additional costs to an employer than just the wages themselves. It’s also an increase to associated costs, including National Insurance Costs (NICs) and holiday pay. With the temporary change in NICs also being introduced in April to accommodate the incoming Health and Social Care Levy, employers also need to consider this additional 1.25% increase in NICs.
The timing of these increases will no doubt be challenging, especially with energy costs and supply costs also on the rise. One of the best ways to prepare for tax and cost increases is to make sure you have a strong understanding of your business financial position.
It may be worthwhile speaking to a financial expert to get a comprehensive overview of your accounts and to be sure you can afford your new payroll obligations. We would also recommend investing in accounting software. This will provide a low-budget way to track your income, costs, and cash-flow.
At GWA, we have a dedicated team able to deal efficiently with your entire payroll, employment and HR issues. So, if you would like to discuss these latest changes or ensure your salaries are processed correctly, please get in touch. We’re here to help.