2022 – Is the National Minimum Page (NMW) Increasing?
The government has outlined its proposal to increase national minimum wage payments for workers aged 23 and over from £8.91 per hour to £9.50 per hour. These changes, if confirmed, will come into effect from April 2022 and represent an increase of more than 5%; the third-highest annual rise since the financial crash in 2008. The increase is a continuance of Boris Johnson’s “levelling up agenda” and his goal to move towards a high wage, high skill and high productivity economy.
It's expected that a similar increase will be applied across all age bandings of the national minimum wage rates, as well as to payments associated with family-friendly leave. For example, maternity, paternity, adoption, shared parental and parental bereavement pay. The increase will likely also be in place for statutory sick pay entitlements, however this may mean a subsequent rise to the lower earnings limit, for which employees must meet to be eligible for most statutory payments.
Interestingly, there were no changes to statutory guarantee payments (SGP) in April 2021, so it is unclear whether the same will apply for the financial year starting April 2022. The ending of the furlough scheme in October 2021 may instigate a rise in the number of employees being placed on lay off or short time working, which would see them being given SGP as an alternative to their normal wages, due to the reduction in available work. The extension of the Kickstart Scheme and implementation of the JETS Scheme will support unemployed individuals into skilled jobs. However, as yet, the government has not announced enhanced support packages for existing workforces. As such, the importance of an increase to statutory guarantee payments may be prevalent in the coming months.
Separately, the government has announced plans to increase national insurance payments by 1.25% from April 2022. From April 2023, the increase must appear as a separate deduction on payslips as a “social care levy” and will be extended to working pensioners for the first time. Following this announcement, employers will have to prepare their payroll teams for the adjustment from next April, to ensure they are meeting their legal obligations and making the correct deductions from employee wages. It may also be of benefit to send a reminder email to staff, or update them through normal business channels, so they are aware in advance that there will be a decrease in their take home pay, due to the increase in national insurance payments. Some employees will be understandably upset about this but there is no obligation on employers to provide additional benefits or pay increases to cover the difference in net pay. Employers can make their staff aware that this was not a business decision, but a necessary step mandated by the Government.