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  • Overview

     

    Rates from April 2022

    Current Rates (April 2021 to March 2022)

    Increase (%)

    National Living Wage (NLW)

    £9.50

    £8.91

    6.6%

    21-22 Year Old

    £9.18

    £8.36

    9.8%

    18-20 Year Old

    £6.83

    £6.56

    4.1%

    16-17 Year Old

    £4.81

    £4.62

    4.1%

    Apprentice Rate

    £4.81

    £4.30

    11.9%

    The government has confirmed that the National Living Wage (NLW) will increase along with all other hourly rates as recommended by the Low Pay Commission (LPC). The Chancellor - Rishi Sunak said that “for a full time worker, that is a pay rise over £1,000 [which] will benefit over 2 million of the lowest paid workers in the country”. The increase in NLW represents the improvement in economic conditions. GDP is slowly approaching its pre-pandemic level and steady growth is expected next year according to the LPC.

    Whilst the increase has been welcomed by workers, the rise in wages could place a strain on small to medium sized businesses, who will also be impacted by the increase in National Insurance contributions. National Insurance contributions paid by both employed and self-employed workers will rise by 1.25% from April 2022 with the intention of helping to fund the health and social care sector.

    Who is entitled to the National Minimum Wage (NMW)?

    Anyone who is employed as an employee or a worker must get the NMW or NLW regardless of whether they are full time, part time, doing essential training or working in a small or start up business. It also applies to agency workers, agricultural workers, apprentices, casual labourers, casual workers, and employees on probation, foreign workers, home workers, offshore workers, and seafarers, workers paid by commission, piece workers, and zero-hours workers.

    How and when do I start paying my employees the higher rate?

    The higher rate starts to apply from the next ‘pay reference period’ after the increase. The ‘pay reference period’ is the period of time the pay covers, for example the period will be 1 day, if the employee or worker is paid daily, 1 week, if paid weekly, or 1 month, if paid monthly. The period cannot be longer than a month. So if there is a NMW increase on 1 April, for example, the worker (Mark) gets paid on the 10th of the month. The old rate will apply until the next pay reference period starts on 11th April. At a minimum, Mark should get paid the old rate for 1 April to 10th April and the new rate for 11th April to 10th May.

    What should employers be aware of?

    The plan should spur employers to review the measures they have in place to ensure that they do not inadvertently pay staff less than what they are entitled to. Payroll systems should be reviewed at the same time to ensure that staff payment details and information are up to date. Employers will also need to ensure that their payroll systems flag when an employee is approaching key birthdays, so that they can check whether that employee’s pay needs to be increased to meet NMW requirements.

    The higher rate may bring some salaried staff close to the NMW amount, meaning that it is not just staff on hourly rates that will be affected. Staff who work 37 hours per week will have to earn just under £20,000 to be earning NLW and the increase in 2022 and any future increases will need to be considered for salaried staff also.

    The above measures are extremely important and it is fundamental that employers ensure that they are adhering to the NMW rates as non-compliance of the NMW can lead to a 200% penalty and a large reputational impact of being publically named and shamed.

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Jessica Wells

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Jargon Buster