The minimum wage in the UK is increasing from April 2022. In this blog, we will look at what the new rates are, and the effects this may have on businesses.
What are the new UK minimum wage and national living wage in 2022?
The National Living Wage used to apply only to those aged 25 and over, but it has now been brought down to those over 23.
As of the 1st April 2022, the National Living Wage for those aged 23 and over is increasing to £9.50 per hour, up from £8.91.
The minimum wage is also increasing as follows:
● For 21- and 22-year-olds, the rate will be £9.18 per hour (previously £8.36).
● For those aged 18-20, it will be £6.83 per hour (previously £6.56).
● For those under 18, it will be £4.81 per hour (previously £4.62).
● The apprentice rate will rise to £4.81 per hour (previously £4.30).
It is a legal requirement that businesses pay their employees no less than the minimum wage for their age.
When do the new rates apply?
This is good news for minimum wage workers as the cost of living is also increasing, but employers need to ensure that their records are changed accordingly and that all employees on minimum wage or National Living Wage are paid in line with the new rates from their next pay reference period after the increase on the 1st April 2022.
The pay reference period is the period of time for which the pay covers (e.g., daily, weekly, or monthly). If a pay reference period starts before the date of the increase but finishes after, then that period will be paid at the former, lower rate. The next period, and those thereafter, will be paid at the new, higher rate.
What does this mean for businesses?
It is important for businesses to include the 2022 minimum wage increase in their budget calculations, as it could be quite a significant cost increase depending on the number of employees you have. As a result of the National Insurance increase, employers will also be paying an additional £241.87 a year per employee.
If you currently pay your employees a rate above the current minimum wage, you may need to consider whether your pay rate is still competitive enough, or whether it is worth increasing those rates to retain your talent as other businesses are sure to be doing. You could also consider offering performance incentives that may help to increase your revenue.
The UK economy is 80% service-based, meaning consumer spending is essential, and if everyone is being paid more, then they can also spend more. In addition, if your employees are performing better because they feel valued, then you will likely see an increase in customer satisfaction and repeat business.
Is there any support available for businesses to help with the wage increase?
Government support is available for some customer-facing industries, such as travel, leisure and hospitality businesses. Hospitality and leisure firms in England can apply for local authority grants of up to £6000, designed to help lessen the impact of the coronavirus on new businesses, which may also help some small businesses with wage increases.
Whilst the minimum wage increase means you need to spend more on your employees, their morale is likely to be higher and raising their wages can be viewed as an investment in your business. All workers deserve a fair wage, and those who feel they are being properly compensated are more likely to perform well in the job and stay with your company for longer.
If you need any advice on the minimum wage increase and its impact on your accounts, you are welcome to get in touch with our team.