Minimum pay rates set to increase from April 2019

On 1st April 2019, the National Living Wage is set to increase. It’s estimated that the rise will benefit over 2.4 million people. National Minimum Wage rates are increasing too. So, are you set to get a boost in your next pay packet? Or, if you’re a business owner, what do you need to know about these changes? Find out in this week’s blog. 

For workers aged 25 and over, the National Living Wage (NLW) is set to increase by 4.9% from 1st April 2019 from £7.83 to £8.21 per hour.  It’s estimated that the rises will benefit over 2.4 million people.

For workers aged 21-24, the National Minimum Wage (NMW) is also set to increase, by 4.3% from £7.38 to £7.70 per hour.

The Apprentice rate applies to workers undertaking an apprenticeship who are aged 19 or under, or aged over 19 but in their first year of the apprenticeship.

What is the National Living Wage?

Introduced in April 2016, it’s essentially a statutory minimum hourly rate that employers must pay employees who are 25 years old and above. It was introduced as an extension of the National Minimum Wage which was already in place. 

It’s not to be confused with the ‘Living Wage’ which is a non-mandatory amount recommended by an independent campaign group.

Who decides the NLW / NMW?

Simply put, the Government.  Reviewed annually and announced in the Budget by the Chancellor, it’s based on advice provided to the Government by an independent advisory body called the Low Pay Commission (LPC). This body is made up of employers, trade unions and academics.

Why do young people receive less pay?

According to the LPC, there is evidence that younger workers are more at risk of being priced out of jobs than older workers, with worse consequences if they end up unemployed.

What do these increases mean for employers?

Employers must pay their employees at the relevant minimum hourly rate. Employers who breach NLW and NMW rules could face legal action from employees and investigation by HMRC, which can result in financial penalties as well as being publically ‘named and shamed’.

It’s also worth noting that this isn’t just something which should be reviewed every April when the rates increase, you need to diarise any workers’ birthdays which will take them to the next level, such as ages 21 or 25. 

There have been several high profile cases recently which have seen employers who have inadvertently fallen foul of the regulations. It’s not just the rates of pay you should consider; you also need to look at factors such as your practices relating to working time, pay periods and whether any deductions are being made from worker’s pay. It can be a difficult field to navigate so we recommend taking specific legal advice relating to your individual circumstances.

Legal obligations aside, workers who are correctly remunerated are going to feel more valued and engaged, so it really is in the employer’s best interest to make sure you’re getting it right.

Another consideration for employers is, although your pay rates may be above the legal minimums, these increases can ‘eat’ into any other pay rates such as premiums paid for unsocial hours. Suddenly those enhanced rates might not seem so attractive to your staff.  So, it might be relevant to you to look at your pay structure as a whole to ensure your pay rates are competitive.

Our Consultants have expert market knowledge, so if you’d like to discuss this further, please contact your local branch.