Minimum wage changes – is your business ready?

In November 2023 the Government announced a minimum wage increase which was focused on helping to protect low-paid workers’ living standards in light of the current economic climate and cost of living crisis.

The changes will see eligibility for the national living wage (NLW) extended as the age at which entitlement to the highest rate reduces from those aged 23 and over, to 21 and over. The hourly rate will increase from £10.42 to £11.44 (9.8%), with workers aged between 18 and 20 set to get an even bigger boost of 14.8% (£7.49 an hour to £8.60).

According to the Low Pay Commission, the new rates include the ‘largest ever increase in the minimum wage in cash terms and the first time it has increased by more than £1.00; and the NLW remains on track to achieve the Government’s target that NLW will reach two-thirds of median earnings by 2024.

 

What do the minimum wage changes mean for my business?

Due to come into force on April 1^st 2024, businesses are now being urged to check that they have put measures in place to make sure that they are compliant, with legal experts warning that those who pay under the legal limit could find themselves in hot water.

Here Katie Ash, Head of Employment Law at Banner Jones, explains what employers need to consider when preparing for the changes.

“The National Minimum Wage is the minimum pay per hour almost all workers are entitled to. It forms part of the National Minimum Wage Act 1998, and any employer not paying the minimum wage can be fined by the UK tax authority, HMRC,” Katie explains.

“Whilst most businesses take steps to ensure their workers are paid correctly, and in line with any changes in the level of minimum wage, it’s not uncommon for companies to make mistakes, which inadvertently get them in to trouble and risking a fine.”

“Organisations that operate on shifts or employ seasonal workers are particularly vulnerable to miscalculations, and errors are often made when a worker moves up an age band or completes an apprenticeship.”

While Katie says that in most of the cases she has encountered mistakes are quickly identified and rectified, with the employee receiving backdated payments, she warns that the potential consequences for businesses who repeatedly break the rules or don’t take action to resolve matters quickly can be significant.

She says: “The minimum wage must be paid by every single business, in every single sector regardless of size. It is the same across all parts of the UK, however the amount that each employee receives can vary depending on their age, and if they are an apprentice.”

 

What are the minimum wage changes?

From 1 April 2024, the increases will be:

• National Living Wage for over 21s: £10.42 to £11.44
• National Minimum Wage for 18 to 20 year olds: £7.49 to £8.60
• National Minimum Wage for under 18s: £5.28 to £6.40
• The Apprentice rate: £5.28 to £6.40

“Any employer who doesn’t pay the minimum wage can be fined by the UK tax authority, HMRC, and workers are encouraged to log a complaint with HMRC if they feel they are being underpaid,” explains Katie.

“To make sure that your business is compliant, a full review of all salaries should take place before the April 1^st deadline. The pay a person receives should be calculated on an hourly basis, and it should be cross referenced with their job title and their date of birth.

“Where necessary, an increase should be introduced for April to bring each employee into line with the minimum payment amount for their specific age group and their role. Payroll then needs to make sure that the wage increases throughout the year if a member of staff moves from one age bracket to another.

“Businesses that employ seasonal workers and shift workers also need to go one step further, as do companies that have a strict dress code in place” Katie explains.

On 21 June 2023, the government published the names of 202 businesses for failing to pay their employees the minimum wage. These included WH Smith, Argos and Marks & Spencer.

It can also be difficult where someone is salaried, but works varied hours on a seasonal basis, such as more hours in the summer and less hours in the winter.

Employers need to ensure that the minimum wage is paid when the work is actually done, even if over the year, and that the employee has been paid the appropriate pay for the overall number of hours undertaken.

Katie continues: “In my experience, most companies want to do what is right by their employees, and that includes paying a fair rate. However, the Government will not hesitate to name, shame and fine organisations that they feel are purposefully avoiding their responsibilities.”

“This is one of those areas where preparation will be far better and far cheaper in the long run.”

If you would like advice on the changes to the minimum wage and how to get your business ready, get in touch with the Banner Jones Employment Law Team at employment@bannerjones.co.uk