Increases have been announced for both the statutory minimum wage and the voluntary living wage rates, which are scheduled to come into effect in Spring 2019. These planned changes have received a significant amount of media attention and it is important that employers are clear on these new requirements well ahead of time.
As confirmed by Philip Hammond in the Autumn 2018 budget, the statutory minimum wage rates for all workers will increase following recommendations from the Low Pay Commission (LPC). The National Living Wage, which is the minimum hourly rate for those aged 25 and over, will increase by 4.9% from £7.83 to £8.21. This means a full-time worker paid at the national minimum is set to receive a £690 annual pay rise.
In addition, the minimum rate for 21-24 year olds will increase from £7.38 to £7.70 per hour, 18-20 year olds will experience an increase from £5.90 to £6.15 an hour and 16-17 olds will be entitled to £4.35 per hour, up from £4.20 previously. The apprentice rate will also change, rising from £3.70 an hour to £3.90. The Treasury anticipates these changes, that will come into effect from 1st April 2019, will benefit 2.4 million workers and improve the financial security of those in insecure employment.
Employers who fail to comply with the increases to the statutory minimum rates from April 2019 will be in breach of the law. In recent times HMRC have taken a hard line on those who break national minimum wage law and offenders could face penalty fines of up to 200% of the underpayment, up to a maximum of £20,000 per worker, and their details may be publicly disclosed by the government’s ‘naming and shaming’ scheme.
Not to be confused with the aforementioned National Living Wage, the voluntary living wage rates are also set to increase. These rates, also known as the ‘Real’ living wage are reviewed each year by the independent Living Wage Foundation and are calculated based on the cost of living. Changes will see these rates rise from £10.20 per hour in London and £8.75 per hour in the rest of the UK, to £10.55 and £9.00 respectively.
As mentioned there is no requirement for employers to pay staff these enhanced rates, however recent estimates suggest over 4,000 currently choose to, recognising this as a sign of their commitment to employee wellbeing and a way to attract and retain skilled workers. Employers who have signed up to the voluntary scheme have 6 months to implement the new rates, meaning they should be in place by 5th April 2019.
When it comes to issues of pay it is important that employers, and payroll personnel in particular, plan ahead of time to ensure any new rates are reflected in workers’ salaries. Pay can be a highly sensitive issue and getting it right will be key to ensuring good employee relations and avoiding any negative public exposure.