National Living Wage update: have you prepared for the year ahead?

Kate Palmer - HR Advice and Consultancy Director

April 06 2021

Now it’s April, we’re under a new tax year. And that means there’s a whole list of changes for employers like you.

From wage hikes to more statutory support, you could face bigger costs in the months ahead.  

Make sure you adjust your payroll and prepare your staff for these updates…

National Minimum and Living Wage rises

It’s normal for the minimum wage to increase in April.

But this year, the government expanded the National Living Wage to include all workers aged 23 and over. Before now, the National Living Wage only covered people aged 25 and above.

This means you need to adjust your payroll for workers who are now above the new threshold.

Plus, the National Minimum Wage for will increase for all ages. As of 1 April, here are the new hourly rates you need to pay:

  • Staff aged 23 and above (National Living Wage): £8.91
  • Staff aged 21-22: £8.36
  • Development rates for staff aged 18–20: £6.56
  • Young workers rate for staff aged 16–17: £4.62
  • Apprentices under 19 or those in first year of their apprenticeship: £4.30

Even if you previously paid above the minimum wage, these changes could mean you’re no longer paying your staff enough. And if you don’t adjust your payroll, employees could report you to the HMRC.

That’s why it’s essential you check staff wages against the new rates.

More support for families

When your staff have children, they’re entitled to statutory support. And since the 4th of April, you now need to slightly increase the amount you pay.

You now need to pay a minimum of £151.97 per week (up from £151.20). This includes maternity, paternity, adoption, and shared parental pay.

Statutory Sick Pay increases

This month, you’ll start to pay a higher Statutory Sick Pay (SSP) rate. As of the 6th of April, your staff are now entitled to £96.35 per week. This has jumped from £95.85 per week.

However, the lower earnings limit remains the same. This means your staff still need to earn an average of at least £120 a week to qualify for the support.

If you have a small-to-medium sized business, you can claim back up to two weeks of SSP for employees off due to coronavirus. Head to the government website and claim through the ‘Coronavirus Statutory Sick Pay Rebate Scheme’.

Staff can receive more redundancy pay

Due to changes on the 6th of April, your employees could receive more redundancy pay.

When you calculate redundancy pay, the maximum “week’s pay” is now capped at £544 instead of £538. This means the maximum statutory redundancy payment is now £16,320.

However, for lay-offs and short-term working, the statutory guarantee pay still stands at £30 per week.

Unfair dismissal pay-outs increase

If you lose an unfair dismissal claim at a tribunal, the amount you pay out could increase.

In line with redundancy payments, workers can now receive a maximum of £16,320 through the unfair dismissal basic award.

Plus, workers can now claim more to cover past and future losses due to their dismissal. With the unfair dismissal compensatory award, workers can now claim compensation up to £89,493 (an increase from £88,519).

And if you don’t re-hire an employee after court instructions, you could now pay up to £28,288 in compensation.

The Supreme Court ‘sleep-in’ ruling

The Supreme Court ruled that care workers are only entitled to minimum wage for the hours they are awake and working. That means care providers won’t need to pay the minimum wage for staff when they’re sleeping during a shift.

And if your staff need to sleep at work, this could mean you’ll save significant costs and avoid costly back-pay claims.

Changes to IR35 legislation 

In an effort to clamp down on tax fraud, the government updated the IR35 law for private companies. If you have a medium or large business, it’s now up to you to decide whether workers are contractors or not.

Previously, contracted staff declared their own worker status to HMRC. But now, you’ll need to do this. It means you’re liable if the HMRC finds you’re mistakenly claiming for non-contractor staff – and since that could amount to tax evasion, you could face a hefty fine. 

Need to speak to an expert?

From redundancy pay to minimum wage, there’s a lot you need to consider. That’s why our HR experts are here to take the confusion out of managing your people.

With our 24/7 helpline, you can receive practical advice in plain English – whenever you need help. To see how you can enjoy our expert support, call us today on 0800 028 2420.  

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