Biggest ever increase to minimum pay rates from April 2024

​On 1st April 2024, we’ll see the biggest ever increase to the National Living Wage (NLW) come into place.

And there’s good news for young people - currently, the National Living Wage has a minimum age threshold of 23 and above (after being lowered from age 25 in April 2021), but also from April, it’s being extended to those aged 21 and 22 as well.

Those aged 20 and under, as well as Apprentices, will be pleased to hear that National Minimum Wage rates are increasing too.

Confirmed by government last November within their Autumn Statement, these mandatory pay rises will boost the pay packets of an estimated 2.7 million people.

These increases deliver on the Conservative manifesto pledge to abolish low pay, defined at below 66% of median earnings.

Chancellor of the Exchequer Jeremy Hunt said:

“Next April all full-time workers on the National Living Wage will get a pay rise of over £1,800 a year. That will end low pay in this country, delivering on our manifesto promise.”

So, is your pay about to increase? Or, if you’re a business owner, what do you need to know about these changes?

The NLW will increase on 1st April 2024 to £11.44 per hour from £10.42 per hour. This represents an increase of £1.02 or 9.8% for over 23s, and £1.26 or 12.4% for over 21s.

Workers aged 20 and under, along with Apprentices, who receive the National Minimum Wage (NMW) have not been left out and will also see an increase to their pay. 

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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. It was introduced as an extension of the National Minimum Wage which was already in place. Up until April 2021, it applied to those aged 25 and over, but this was extended to include those aged 23 and 24. Subsequently extending even further to those aged 21 and 22 from April 2024.

It’s not to be confused with the ‘Living Wage’ or the ‘Real Living Wage’ which is a non-mandatory amount recommended by an independent campaign group. They believe the amount set by the government is not sufficient, and also that there should be a London weighting for those living in the capital, due to higher living costs.

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.

WHAT DO THESE INCREASES MEAN FOR EMPLOYERS?

Employers must pay their employees at least 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 18 or 21 and track any workers on recognised Apprenticeships.

There have been several high-profile cases that 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.

**NOTE - THIS BLOG DOES NOT CONSTITUTE LEGAL ADVICE**