As the new financial year begins, your staff might be wondering why their pay hasn’t gone up.

While there’s no specific law that says you have to give your employees a pay rise every year, there are three situations when they could reasonably expect to get one…

  1. The National Minimum Wage goes up again

If you pay your staff the National Minimum Wage (NMW), or close to it, you need to look out for changes to the law.

Up until 2017, the government made changes to some minimum wage categories in April, and others in October. But it now makes all changes in April.

Here are the minimum wage rates after the 2018 increases:

  • Workers aged 25 and over (aka the National Living Wage): £7.83 per hour
  • Workers aged 21 – 24: £7.38 per hour
  • Workers aged 18 – 20: £5.90 per hour
  • Workers over compulsory school age but not yet 18: £4.20 per hour
  • Apprentice rate: £3.70 per hour

These are the minimum rates that you must pay your employees.

  1. You increase pay every year

If you’ve always given your workers a pay rise at the same time every year, but then fail to do so without warning, your employees could claim this is unfair.

Even if there’s no mention of a pay rise (or any other benefit) anywhere in their contracts, your staff will have a strong case against you if they can prove that:

  • They have a reasonable expectation of receiving the benefit
  • The benefit has become well established over time
  • The benefit is clear and unambiguous

On the other hand, if you explicitly told your staff that a pay rise was only a one off, they probably don’t have a case.

  1. You promised them a pay rise in their contracts

Your employment contracts might include a clause that promises an annual pay increase for all members of staff.

If this is the case, you must give them a pay rise, even if you can’t afford to.

If you want to change the terms of your contract, you need to get all your staff to agree. But because removing pay increases will mean they’ll lose out on extra money, it’s unlikely they’ll accept.

To prevent this from happening, you could state that any pay increases are at your discretion and subject to your business meeting its targets.

Pro tip: link pay increases to performance

The most transparent way to reward your staff is to give them a pay rise on the condition that they complete certain objectives that you set out for them, such as reaching a specific number of sales or referrals.

You can also outline how often you’ll review pay and when you’ll award any increases (quarterly or half-yearly, for example).

Linking pay rises to performance is also a great way to encourage your staff to work hard and get better at what they do. It also helps to remove any doubt in their minds over how and when they’ll get a raise.