Out-Law News | 18 Nov 2022 | 4:24 pm | 1 min. read
An increase to the UK national minimum wage unveiled in the chancellor’s autumn statement should prompt employers to ensure that they do not inadvertently pay staff less than what they are entitled to, according to one legal expert.
On Thursday, the Jeremy Hunt announced plans to raise the national living wage (NLW) for individuals aged 23 and over to £10.42 an hour, following the recommendations of the independent Low Pay Commission (LPC). The 9.7% rise represents an increase of over £1,600 to the annual earnings of a full-time worker on the NLW and is expected to benefit over two million low paid workers.
At the same time, Hunt told MPs that the government had accepted the LPC’s recommendations for increasing other national minimum wage (NMW) rates too, including the rate for 21- to 22-year-olds by 10.9% to £10.18 an hour. The Treasury will also increase the hourly rate for 18- to 20-year-olds to £7.49; for 16- to 17-year-olds to £5.28; and the apprentice rate to £5.28. Hunt said the reforms would take effect from 1 April 2023.
Jon Fisher of Pinsent Masons said NMW legislation was now a relevant consideration for far more employer due to the significant increases in recent years. He said: “It's a mistake just to think about hourly paid employees, as the higher rates increasingly bring salaried employees close to the minimum. Once the increase takes effect, the minimum annual salary for a worker aged over 23 working for 37.5 hours per week will be more than £20,300.”
“Even where an employee's headline rate is more than the new minimum, employers will need to review the position carefully due to the complexity of the NMW calculation. This is particularly relevant where employers operate salary sacrifice schemes, such as for pension contributions. Employees must not be allowed to sacrifice their pay to below the NMW, and employers should ensure that their payroll systems have measures in place to prevent this from happening,” Fisher said.
He added: “Most benefits and many pay premiums do not count towards NMW. Employers who are concerned about affordability may want to consider consolidating those benefits and premiums into the basic rate. That will often involve a change to contractual terms, and so employers looking to do this before the new NMW rate takes effect in April will need to kick off discussions as soon as possible.”
26 Oct 2021