Out-Law / Your Daily Need-To-Know

National minimum wage rise should spur employer review

Out-Law News | 26 Oct 2021 | 3:14 pm | 1 min. read

The planned increases to the national living wage and national minimum wage in the UK 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, an expert in employment law has said.

Jon Fisher of Pinsent Masons, the law firm behind Out-Law, was commenting after it was trailed that UK chancellor Rishi Sunak would announce an increase to the national minimum wage in his autumn budget.

According to the BBC, the national minimum wage will rise from £4.62 to £4.81 an hour for workers under the age of 18, from £6.56 to £6.83 an hour for 18- to 20-year-olds, and from £8.36 to £9.18 an hour for those aged 21-22. The national living wage for over-23s will increase from £8.91 to £9.50 an hour. The changes will take effect on 1 April 2022.

“This significant increase will mean that national minimum wage (NMW) legislation becomes relevant to far more employees,” said Fisher. “This won't be confined to 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 on a 40-hour week will be just under £20,000.”

“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,” he said.

“Employers also need to ensure that their systems flag when an employee is approaching their 23rd birthday, so that they can check whether that employee’s pay needs to be increased to meet the NMW requirements,” Fisher said.

Employers can be fined up to 200% of arrears for NMW breaches, and may face criminal prosecution in some circumstances.