Every April, new and updated employment law provisions come into force. If you employ people within your business, you should be aware that all minimum wage rates will increase on 1 April. This includes the National Minimum Wage (NMW) rates and the National Living Wage (NLW) rates.
What you need to know about the NMW and NLW
The NMW is an hourly rate set by the Department for Business, Energy & Industrial Strategy (BEIS) and enforced by HM Revenue & Customs (HMRC). There are different rates depending on age and whether your employee is classed as an apprentice. The NMW means that as an employer you must pay your employees a minimum hourly rate for the hours worked in their pay period, for example, a week or a month.
The NLW was introduced from 1 April 2016 and is essentially a premium on top of the NMW. Originally it was for workers aged 25 and over who were not in the first year of their apprenticeship. From 1 April 2021, it was introduced for workers aged 23 and over, who are not in the first year of an apprenticeship. While the NLW operates as a higher level of NMW, the same rules apply to both.
Who is entitled to the NMW or NLW?
It does not matter how large or small your business is, you still have to pay the correct minimum wage.
Almost all employees and ‘workers’ over school leaving age in the UK are entitled to receive the NMW and/or NLW – this includes full and part-time employees, agency workers, migrant workers and casual workers.
HMRC has a very useful calculator for employers to check whether you are paying your employees the correct minimum wage or if you owe a payment from the previous year.
To make it confusing it should be noted, however, that there are certain categories of ‘workers’ that will not be entitled to the NMW or NLW. These include (but are not limited to) the following:
- self-employed people running their own business
- company directors
- people who are volunteers or voluntary workers
- workers on a government employment programme, such as the Work Programme
What are the new NMW and NLW rates from April 2023?
The new rates set out below will come into place from April 2023 and run until the end of March 2024. The rates are per hour.
National Living Wage (23 and over)
- £10.42 (up from £9.50)
21-22 Year Old Minimum Wage
- £10.18 (up from £9.18)
18-20 Year Old Minimum Wage
- £7.49 (up from £6.83)
16-17 Year Old Minimum Wage
- £5.28 (up from £4.81)
Apprentice Minimum Wage
- £5.28 (up from £4.81)
- £9.10 (up from £8.70)
The NLW has increased to £10.42 (being the highest rate NMW). This differs from the ‘Real Living Wage’ which is a wage set by the Real Living Wage Foundation. It’s entirely voluntary, but many employers choose to pay it anyway. The NLW is based on median earnings, whereas the Real Living Wage rates are higher because they are independently calculated based on what people need to get by. For 2022/2023, the Real Living Wage is £10.90 (and £11.95 for London wages). Find out more here.
These new rates reflect an increase of 9.7% to 10.9% across the age and apprentice categories. Most employees who get paid the minimum rate will get a rise of 9.7% from April 2023 which can work out as much as £150 a month extra for a full time worker aged over 23. The increases are intended to support the living standards of lower paid workers in light of the cost-of-living crisis and to fall in line with the Government’s intention to reach two-thirds of median earnings of the relevant population by 2024. Further information on the rates can be found here.
What you need to do as an employer
Ensure payroll is set to meet legal requirements and you are prepared for the wage increase before 1 April 2023. For existing employees and new starters, you will need to ensure that you are paying the correct rate from that point onwards.
Information currently held on your payroll software should be reviewed and updated to reflect:
- Accurate employee information (age and status (i.e. apprentice)
- Accurate payroll data
- Hourly rates to meet legal requirements
- Potentially revise and reissue contracts of employment
- Ensure all hourly rates reflect company policy / contractual obligations
For employees our blog ‘Understanding Your Payslip – Tax Codes & Deductions Explained’ looks at the core components of a payslip including the tax code and what it means, deductions that might be present on a payslip and what to do if you think you are being overtaxed or undertaxed.
Need A Hand?
Understanding payroll requirements and deductions can be daunting for small business owners. If you are a business currently employing staff or about to start hiring, you should ensure you understand your legal obligations and that your payroll software is suitable for the size of your business and is both auto-enrolment and HMRC compliant.
For more information on any aspect of payroll, give one of our expert team a call on 0117 3790810.
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This post was written by Steph Roffey