How are the rates changing in 2022?
The Government is putting in place increases to the National Living and National Minimum Wages that were recommended by the Low Pay Commission, an independent advisory board. As of 1st April 2022 the National Living Wage will see its largest increase (6.6%) to £9.50 per hour. At the same time, the National Minimum Wage (NMW) rates will be increased as follows:
- from £8.36 to £9.18per hour for 21 to 22-year olds;
- from £6.56 to £6.83per hour for 18 to 20-year olds;
- from £4.62 to £4.81per hour for 16 & 17-year olds; and
- from £4.30 to £4.81 per hour for apprentices;
If you provide some form of staff housing as part of the contractual arrangements, then the daily accommodation offset will apply. This will change from the current rate of £8.36 per day to £8.70.
What is the National Living Wage?
The National Living Wage specifically applies to workers aged 23 and over. It was introduced in April 2016 as an addition to the minimum wage scheme. All employers must pay the National Living Wage to workers who qualify.
What is the National Minimum Wage?
The National Minimum Wage applies to people above school leaving age, up to age 22. Twenty years since it was first introduced, the minimum wage has seen the wages of the lowest paid in the country grow faster than other workers.
Most adult workers in the UK must be paid a minimum wage by law, regardless of the size of the business. The National Minimum Wage was first introduced on 1 April 1999 by the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 1999.
What about Apprentices?
The minimum wage for apprentices is based on people aged 16 to 18, or people over 19 but in the first year of their apprenticeship. If apprentices are over 19 and have finished the first year of their apprenticeship they are entitled to the minimum wage of their age group.
Paying the National Minimum Wage
The government provides detailed guidance to help employers calculate the hourly rate of pay under the National Minimum Wage. The guidance outlines what payments should be included and excluded, the reference period for averaging pay, what happens with accommodation and benefits in kind and the hours for which the minimum wage must be paid.
Penalties for not paying the National Minimum Wage
HMRC has extensive powers to investigate, inspect and enforce if an employer is believed to not be paying the National Minimum Wage or falsifies records. Doing so is a criminal offence and carries a maximum fine of £20,000 per employee. Employers can also be banned from being a company director for up to 15 years. The employer will have to pay arrears which will be due within 14 days and the maximum figure is based on 100% of the unpaid wages.
Other notable changes due in April
The rate for 2022/23 for Statutory Maternity (SMP), Paternity (SPP), Adoption (SAP), Parental Bereavement (SPBP) and Shared Parental (SShPP) Pay are set to increase from £151.97 to £156.66 per week.
The rate of Statutory Sick Pay (SSP) is also set to increase from £96.35 to £99.35 per week.
The average earnings an employee has to earn to be entitled to these payments is set to increase from £120.00 to £123.00; this will be the first increase to this rate for two years.
Exact dates these changes take place is to be confirmed.