In last week’s Autumn Budget, Chancellor Rishi Sunak announced some changes to the National Living Wage (NLW) and National Minimum Wage (NMW), which will come into effect from April 2022.
Following the recommendations of the independent Low Pay Commission, the government will increase the NLW for individuals aged 23 and over by 6.6% from 1 April 2022. The government has also accepted the recommendations for the other NMW rates to be increased.
This increase will mean the average full-time worker over the age of 23 will receive an extra £1,074 a year before tax.
Below, we break down these changes and what they mean for you and your employees.
What is the difference between the NLW and NMW?
It does not matter how small an employer is or how many employees they have, they are still required by law to pay the correct minimum wage.
Anyone who is employed as an employee or worker must be paid the National Minimum Wage, National Living Wage or an Apprentice rate depending on the employee’s age or type of contract.
The different rates are explained as follows:
- National Living Wage – previously the NLW was the hourly rate for those aged 25 or over and working in Britain, however, in 2021/22 the age threshold changed and employers must now pay the NLW to staff who are age 23 and older.
- National Minimum Wage – the NMW is for those aged under 23. To qualify for the minimum wage, you must be at school leaving age (16 years or older).
- Apprentice rate – apprentices are only entitled to the apprentice rate if they’re either; a) aged 19 or under or b) aged 19 or over and are in their first year of apprenticeship.
What are the changes that have been announced?
It was announced in last week’s Autumn Budget that from 1 April 2022, the following increases will take effect:
- National Living Wage (over-23s) – from £8.91 to £9.50
- National Minimum Wage (aged 21-22) – from £8.36 to £9.18
- National Minimum Wage (aged 18-20) – from £6.56 to £6.83
- National Minimum Wage (under-18) – from £4.62 to £4.81
- The Apprentice Rate – from £4.30 to £4.81
Failure to pay the correct rate to your employees can land your business in very hot water with HMRC and attract fines of up to £20,000 per worker. Employers can also be banned from being a company director for up to 15 years if found to be paying their staff below the NMW.
HMRC’s compliance teams can carry out checks of an employee’s records and an employer’s payment history to ensure companies are paying their workers the minimum pay that they are legally entitled to.
How Blue Spire can help?
If you have any questions around employee wages or rates and how these changes may affect your business, then please do not hesitate to contact us today.
Or alternatively, take a look at some of the benefits that Outsourcing your Payroll can have on your business and get in touch if we can help you with this.
