New UK minimum wage rates bring employers closer to non-compliance
Following the Chancellor’s announcement in November’s budget regarding changes to the National Living Wage and National Minimum Wage rates, the National Minimum Wage (Amendment) Regulations 2018 have now been laid before Parliament.
The Regulations implement these increases from 1 April 2018:
- National Living Wage (Over 25’s) – £7.83 (previously £7.50)
- 21-24 year olds – £7.38 (up from £7.05)
- 18-20 year olds – £5.90 (up from £5.60)
- Under 18s – £4.20 (up from £4.05)
The increases are in line with the recommendations of the Low Pay Commission and have been highlighted as the largest increases in a decade for the rates that apply to 18-20 and 21-24 year olds, with increases of 4.7 per cent and 5.4 per cent respectively. The National Living Wage will, in turn, increase by 4.4 per cent.
Whilst the increase in the National Living Wage is no longer geared towards meeting the Government’s initial objective of £9 by 2020 (with suggestions now being that this will be delayed until 2022), these increases are all above both inflation and forecast average earnings growth. That is clearly welcome news for those at the lowest end of the pay scale; however, it will also pose increasing challenges to employers, many of which may now find themselves paying at or around the respective minimum wage rates when that was not previously the case.
Where employers do now find themselves paying in close proximity to the National Minimum Wage and National Living Wage, they should be alive to the myriad ways in which they could inadvertently find themselves actually paying below that rate in real terms. We highlighted a number of these pitfalls in our previous blog back in November.