National Minimum Wage increases

The Chancellor, Jeremy Hunt, delivered the Autumn Statement on Thursday 17 November. In this, he confirmed the rate of National Living Wage (NLW) will increase on 1 April 2023. NLW is the minimum rate of pay which must be provided to all workers aged 23 and over and is due to increase from £9.50 per hour to £10.42 per hour. This 9.7% (92p) increase marks the largest ever increase to NLW.  

The government also confirmed it will implement the National Minimum Wage (NMW) increases recommended by the Low Pay Commission. This will see rates in the NMW structure rise as follows: For 21–22-year-olds, minimum hourly pay will rise from £9.18 to £10.18; for 18–20-year-olds, from £6.83 to £7.49; for 16–17-year-olds, from £4.81 to £5.28; and for apprentices (aged under 19 or 19+ but in the first year of their apprenticeship), from £4.81 to £5.28. Employers should work with HR and payroll teams to implement the changes and communicate it with the wider workforce.  

Whilst the increase is welcomed news for employees, many will still struggle as inflation and the cost-of-living continues to put pressure on household incomes. As such, employers should ensure there is wider support in place to facilitate positive financial wellbeing.  

The removal of the 1.25% uplift in National Insurance contributions, which were introduced in April 2022 to enhance health and social care funding, will be of some benefit to the workforce. Employers should ensure payslips are updated to reflect the NI decrease, as this change took effect on 6 November 2022. 

Similarly, increased wage bills may cause concern for employers who are already facing soaring expenses in other parts of their businesses. This could lead to tough decisions and the need for organisational changes. Where this is this case, employers must make sure they follow fair processes and consult fully with their workforce. 

In the coming weeks, new statutory family-related and sick pay rates are also expected to be announced, but these too won’t take effect until April 2023, giving employers time to prepare. Some outlets suggest the Lower Earnings Limit (LEL), which employees must meet to be eligible for most statutory payments, will be fixed for the 2023-24 financial year. The current rate is set at £123 per week and, if fixed, will entitle more employees to statutory payments (e.g. maternity, paternity, adoption, sick, parental bereavement pay). Staff earning NMW may have previously not met the eligibility requirements for statutory payments but, since this is increasing and the LEL is staying the same, it should bring more people in scope. 

Employers should keep a close eye out for further announcements and be prepared to action the changes. This may involve sending internal communications, training teams and updating policies and procedures. Those who fail to implement NMW increases could face a disruption to employee relations, grievances and tribunal claims, so it’s important these are adhered to.