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A significant change to the National Living Wage is coming into effect from April 2022.

The Treasury has announced that the Chancellor will boost the wage, which currently sits at £8.91 per hour for workers aged 23 and over, to £9.50 with effect from 1 April 2022. This sizeable 6.6% boost will make a huge difference to many workers – it represents the equivalent of around an extra £1,000 per year for a full time employee.

Who is entitled to this wage?

The National Minimum Wage (currently £6.56 for those of at least school leaving age) is applicable to anyone that’s classified as a ‘worker’ – this is someone who has a contract or other arrangement in place to deliver work or services in return for a reward, be it money or a benefit in kind. The National Minimum Wage rises incrementally with age, until the National Living Wage kicks in for all workers aged 23 upwards; the biggest planned increase is for 21-22 year olds, who will receive a 9.8% increase (83p per hour) under the new legislation.

All workers are entitled to the correct minimum wage, whether they’re part-time, casual labourers, agency workers, disabled, trainees, apprentices, foreign workers or fall into another category – as long as they fulfil the requirements of being a ‘worker’ in the eyes of the UK Government, their employer must meet these set wages as a minimum requirement.

What’s the reason for this wage rise?

The UK Government has come under increasing pressure to increase the minimum wage for workers, especially in light of the huge financial pressures that so many sectors and individuals have endured because of the COVID-19 pandemic and after facing criticism over cuts to universal credit.

This increase is designed to support the wages and living standard of low-paid workers. Announcing the upcoming rise back in October 2021, the Government stated that the increases “come against a backdrop of strong GDP forecasts, employment returning to pre-pandemic levels and businesses advertising record numbers of vacancies.”

Does this also apply to apprentices?

All apprentices are entitled to the appropriate minimum wage for their age group, as long as they are aged 19 years or over and have completed the first year of their apprenticeship.

How can your business prepare?

It’s an essential legal requirement that all UK firms, regardless of size, honour the planned increases to the national living wage and the national minimum wage for workers from this April. It’s illegal to not pay NLW and NMW to eligible workers or to fake payment records; firms that fail to do so risk being fined up to 200% in areas for breaches as well as run the risk of criminal prosecution.

Ahead of the legislation coming into effect, all businesses should make sure internal measures are put in place for staff to be paid at the correct, heightened rate from April onwards. For salaried employees, the new minimum annual salary for a worker on a 40-hour contract, aged over 23, will be slightly under £20,000 – a substantial increase.

Employers must also ensure they have fully up-to-date payroll systems in anticipation of the new NLW rise, alerting them to when a staff member is close to their next birthday in order to ascertain whether their pay needs to be increased to meet the requirements of the new legislation. It’s important to note that any pension contributions and other salary sacrifice schemes do not result in an employee’s monthly pay packet falling under the National Minimum Wage benchmarks.

How can I benefit from this?

With these upcoming rises in mind, it’s never been more essential to ensure that your payroll processes are safely and professionally in hand.

We’re here at Gooding Accounts to take the hassle out of payroll, with a specialist in-house team that offers a rich depth of knowledge and hands-on advice on your employees’ changing circumstances. Sound good? Book an appointment today and we’ll tell you everything you need to know.

Book an appointment with us today.

Our friendly and helpful approach to accountancy, ensures that you understand and are in tune with your finances. Our committed team will communicate with you every step of the way so that you understand the position of your financial affairs – get in touch today.