The National Minimum Wage increase: What you need to know to be prepared

It’s getting closer to that time of year again, and no, we’re not talking about chocolate eggs and long bank holiday weekends. We’re talking about the National Minimum Wage and the National Living Wage increase, which occurs in April every year.

The increase in pay rates depends mainly on the age of your employee, and whether they’re an apprentice or not. This means that you may witness a number of different rate fluctuations across your spectrum of staff, but one thing is certain - employers who pay a worker below the correct minimum wage are subject to heavy disciplinary action, so it’s best to get it right the first time around.

In this article, we bring you everything you need to know about the rise in the minimum wage, what it means for your business and the necessary steps you should take to make sure you’re ready for the change.

So, what exactly is the National Minimum Wage and the National Living Wage?

The National Minimum Wage is the lowest remuneration that employers can legally pay their workers. Employees must be at least school leaving age (16) to get the National Minimum Wage.

Those aged 25 and over are eligible to receive the National Living Wage. Introduced by the government in April 2016, the National Living Wage replaces the National Minimum Wage for those aged over 25, and is calculated according to the basic cost of living in the UK. You can read more about the National Living Wage and its implications for employers in our previous blog post here.

The chart below shows the current National Minimum Wage and National Living Wage, and how the rates are set to increase this year across all age brackets:  

With these changes, workers aged under 25 will see the largest increase in a decade in their statutory minimum wage from April 2018, according to the Low Pay Commission.
 

So, how will the increase in the National Minimum Wage and the National Living Wage affect my business in particular?

It’s a criminal offence for employers to not pay someone the National Minimum Wage or National Living Wage, or to fake payment records. HM Revenue and Customs (HMRC) has the right to carry out checks on companies at any given time, and they can also investigate employers if a worker complains to them.

So, with that in mind, it is vital that you pay full attention and be fully compliant with the rise in minimum wages. Here are a few steps you can take to ensure you are prepared for the change:

• Check who is eligible for what within your organisation – This will make you aware of what wage increase your employees are entitled to, enabling you to ensure the appropriate pay rise is in place in time for April 1st
• Keep your records up to date – It’s the employer’s responsibility to keep up-to-date records proving they are paying the minimum wage. All records have to be kept for three years minimum, so keep organised to make sure you’re always one step ahead
• Use the National Minimum Wage and National Living Wage calculator to work out arrears – This will help you to ensure you are paying the correct minimum wage for your employees, while also allowing you to check whether you owe your employees payments from previous years
• Ensure your staff are aware of the pay rise in advance – Letting your employees know that their wage is due to increase, and how much it is due to increase by, will show them that you are complying to the rules and that you are being proactive in dealing with the changes
   

What does the future look like?

The government is committed to increasing the National Living Wage annually, with plans to hit £9 per hour by 2020. So, it is imperative that you take the necessary steps to ensure you are prepared for the increase in 2018 and beyond.

Below, you can find some extra, proactive steps you can take to ensure you are prepared for the increase both this year and in the years ahead:

• Make sure you assess the impact – Knowing well in advance which of your employees is due a pay rise and by how much will help you in the long-term, aiding you in making more accurate financial forecasts for the year ahead to better prepare for what’s to come
• Work smarter – Assess the duties and roles of your employees and put a plan of action in plan to ensure you are making the most out of their time, and therefore receiving the greatest return on investment
• Keep one eye on the future – Know the impact of the National Minimum Wage and the National Living Wage increase on your business well advance of its implementation. Set clear plans for how the annual change will be introduced and funded into your organisation so that, when April comes around again, you’re prepared