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        • Wellbeing Retreat Days
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Minimum wage rates are increasing – are you ready?

The National Minimum Wage (NMW) and National Living Wage (NLW) are the legal minimum wage rates that must be paid to employees in the UK and are based on age and apprenticeship level.

    • NMW is the minimum hourly rate of pay for workers under 23 (or first year apprentices)
    • NLW is the minimum hourly rate of pay for workers over 23 years of age

On the 1 April 2023, the NLW is increasing to £10.42 per hour, a significant jump from the current rate of £9.50 and welcome news for many. New NMW rates are as follows;

    • £10.18 for those aged 21 – 22
    • £7.49 for those aged 18 – 20
    • £5.28 for those aged 16 – 17
    • £5.28 for those aged 16 – 18 and 19 or over in the first year of apprenticeship

For ease of reference, we have summarised these new statutory payments in a factsheet which is available for free download from our website.

When do employers need to increase the rates of pay?

The new rates take effect from 1 April 2023. However, the increase only applies from the following pay period unless that pay period starts on the 1 April. If the pay period (the period of time the pay relates to, not necessarily the pay date) is 1 – 30 April, then the rates need to take effect immediately. If the pay period is 6 March to 5 April, then the pay rate should apply from 6 April onwards. There would be no need to apply two different rates into a pay period. Naturally, the same principles apply if the pay period is weekly. Any changes in pay should be communicated to employees outlining the new pay rate.

What are the challenges in calculating the National Minimum Wage?

Whilst the NMW increase is a positive move for workers, it can be a challenge for many smaller employers who may struggle to meet the extra cost in these challenging times, and calculating deductions can be a minefield.

Some pay deductions for work-related expenses such as tools and uniforms, must not reduce the rate of pay below the NMW. There is also a fairly long list of elements of pay that do not count towards the reference pay for NMW purposes which includes tips and gratuities and any premium element of pay for overtime or shift working.

What are the penalties for non-compliance?

The potential consequences for non-compliance are significant. The government can impose penalties on employers who breach NMW legislation, the maximum penalty being a fine of up to £20,000 and a minimum of £100 for each employee or worker affected, even if the underpayment is worth less. Employers could also face criminal legal proceedings.

NMW is a complex area of law and it is definitely worth seeking professional advice if you are unsure in any way. If you’re an employer looking for support in this regard, or you have any other HR/Employment Law issue you would like to discuss, please contact us on 01942 727200 or email enquiries@employeemanagement.co.uk for a no obligation chat.

  • Lisa Bradley
  • March 23, 2023
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