Living wage changes coming into effect from April 1st, 2023
Starting from April 1st, 2023, the National Living Wage (NLW) will undergo a substantial increase, reaching £10.42 per hour. This boost of 92p or 9.7% is the most significant rise since its establishment in 2016. The adjustment aims to provide some relief to low-paid workers during these challenging times. Simultaneously, the National Minimum Wage (NMW) will also see adjustments.
Understanding the difference between National Minimum Wage and National Living Wage
The National Living Wage is the minimum hourly rate mandated for employees aged 23 and above. Additionally, there are three other brackets of minimum hourly rates for employees based on their age, as outlined below:
- National Living Wage: £10.42
- National Minimum Wage for 21-22 year olds: £10.18
- National Minimum Wage for 18-20 year olds: £7.49
- National Minimum Wage for 16-17 year olds: £5.28
Applicability to employees receiving an annual salary
If your employee receives an annual salary instead of an hourly wage, the new rates may still apply, depending on their earnings and weekly work hours. It's crucial to understand the distinction between salary and wage. A salary constitutes a fixed amount paid at regular intervals, either weekly or monthly. On the other hand, wages are paid on an hourly or daily basis for the work completed during the workday. Regardless of any contractual salary agreement, your employee must be compensated at least the NLW or NMW (based on their age) for the hours worked. If you're uncertain about your employee's earnings complying with the new rates, a member of ThePayTeam can assist in verifying their situation.
Important warning regarding legislation and Compliance
It's essential to acknowledge that the primary aim of this legislation is to ensure that every worker receives at least the minimum wage. Any attempts to bypass or circumvent the regulations are strongly disapproved of by tribunals. As an employer, the burden of proof lies with you in the event of a claim, meaning you would need to provide records demonstrating the actual hours worked in relation to the amounts paid per payslip. To ensure compliance, it's recommended to record the actual working hours every week, even if there are no intentions to vary the payment.
How do I calculate the increase required for my employee?
ThePayTeam clients can request an illustration to show what increase will be required to their employee's annual salary but you can also use the Calculator on the website.
