Last month saw the jump of over 2 million people receiving a pay rise after the national minimum wage increased once again. The minimum wage has increased for all hourly rates. This includes apprenticeships, which have gone up by an extra 20p per hour. These new rates have come into place following a pledge by chancellor Phillip Hammond to increase wages in November.
When Was the National Minimum Wage Increased?
The national minimum wage increase kicked off on the 6th April after it was revealed that 179 companies were not paying a fair wage to their employees. The national living wage has increased from £7.50 per hour to £7.83 per hour. This is a 4.7 per cent increase on the previous year.
The Treasury estimates that the new wage is sure to leave full time workers on basic pay better off by £600 each year. That is an extra £50 per month or 33p her hour. Hammond’s increase on the national minimum wage is part of an ongoing pledge to deliver a rate of £9 per hour to those aged 25 and over by 2025.
This new wage, however, is still below the non-government living wage, which is based on inflation, the measurement of how much prices have risen each year. The personal allowance also increased in April. Workers can now earn up to £350 more each year without income tax. Those who earn above this extra amount will also save an extra £70 a year.
What is the National Minimum Wage?
The national minimum wage is the hourly rate at which all employers must pay to their employees. This rate largely depends on the age of the workers if they are an apprentice. If they are aged 25 or over, they will qualify for the national living wage instead. Both of these rates are a legal requirement.
Failing to meet these rates could result in a large fine or even be featured in the annual list of shame. The rules of the national minimum wage and national living wage states that if you have any employees aged 25 or over and are not an apprentice, their hourly rate must be at least £7.83.
New Rates for National Minimum Wage
The new rate for the national minimum wage are as follows:
- Apprentices now work for a minimum wage of £3.70 per hour
- Those under the age of 18 now earn £4.20 per hour
- Under 20’s will earn £5.90 per hour
- Those under the age of 24 will earn £7.38 per hour
These increases, according to the Low Pay Commission, marks the largest pay rise in a decade for those aged between 18 and 24. That is an increase of 4.7 per cent and 5.4 per cent. These new rates, it claims, will boost the earnings of between 260,000 and 360,000 young workers directly. This is due to increases leading to “spill-over” effects further up the pay distribution. Some young workers may also benefit from increases to the national living wage.
The Difference Between the National Living Wage and Living Wage
The national living wage and the national minimum wage are both set up by the government. All employers are required to comply with these wages. The living wage, on the other hand, is a separately set up wage by the Living Wage Foundation and is reviewed on an annual basis.
Although the living wage is not required, it is set based on what campaigners believe workers should be entitled to while factoring in inflation. Many companies, such as supermarkets, have chosen the living wage in favour of the government set guidelines, paying workers more. The living wage is £8.75 per hour in the UK, or £10.20 per hour if the employee is based in London.
Your Employee has Rights
Your employees are entitled to a payslip and can approach you for one if they no not automatically receive one. If they discover that they are being paid unfairly, which should not happen, they can then seek advice and see their entitlements using the Acas Helpline Online Tool. They should also talk to you directly to resolve the issue, but again, this should not happen if you are in fact paying them fairly.
If you do not pay them fairly, they are entitled to file a formal grievance, and HMRC can also investigate. This can result in fines of up to £20,000 per worker for lack of compliance. If that fine is not paid, the employer could be banned from being a company director for up to 15 years.
Talk to Steven Glicher
If you are worried that the increase will have an impact on your company budget, there are many things you can do to save money elsewhere. Talking to an expert accountant will help your small business adjust its funding in attempt to keep staff and still succeed. Get in touch with Steven Glicher today to find out more.