Employers are facing increased bills as the month began as new national minimum wage rates came into effect.
It follows Jeremy Hunt’s announcement in November that The National Living Wage will rise to £10.42 an hour and most minimum wage bands would rise by 9.7 per cent.
It was designed to help low-paid workers whose living standards had been affected by the current cost of living crisis.
The Low Pay Commission has described the new rates as the “largest increase to since its introduction in 2016”, with a full-time worker receiving an increase of nearly £150 a month.
Bryan Sanderson, said they “will provide a much-needed pay increase to millions of low-paid workers across the UK, all of whom will be feeling the effects of a sharply rising cost of living. For a full-time worker, today’s increase means nearly £150 more per month.
“The tightness of the labour market and historically high vacancy rates give us confidence that the economy will be able to absorb these increases.”
Katie Ash, left, head of employment law at Banner Jones, urged employers to ensure they are compliant or risk fines from HMRC.
“While most businesses take steps to ensure that workers are paid correctly in line with any changes, it’s not uncommon for companies to make mistakes that could land them in hot water,” she said.
“Organisations that operate on shifts or employ seasonal workers are particularly vulnerable to miscalculations, and errors are often made when a worker moves up an age band or completes an apprenticeship.”
While she says that in most of the cases she has encountered, mistakes are quickly rectified, with the employee receiving backdated payments, she also warns that the potential consequences for businesses who repeatedly break the rules or that don’t take action to resolve matters can be significant.
She added: “The minimum wage must be paid by every single business, in every single sector regardless of size. It is the same across all parts of the UK, however the amount that each employee receives can vary depending on their age, and if they are an apprentice.”
The full breakdown:
- National Living Wage (23 or over): from £9.50 to £10.42
- Minimum wage aged 21 to 22: from £9.18 to £10.18
- Minimum wage aged 18 to 20: from £6.83 to £7.49
- Minimum wage for under-18s: From £4.81 to £5.28
- Apprentice rate: £4.81 to £5.28
Claire Berry, Employment Solicitor at Price Bailey said: “Business owners are going to have to look at their efficiencies and consider where cost savings can be made both in terms of staff costs and in other areas of their business.
“This could lead to businesses reassessing roles and restructuring teams and/or outsourcing central functions such as marketing or payroll. This, alongside with increased automation may result in redundancies or businesses offering staff reduced hours. Where gaps in the workforce are identified, it may be that businesses opt for part time employees or casual workers, to reduce costs.”
Sushank Agarwal of INVERTO, the Boston Consulting Group subsidiary specialising in procurement and supply chain management, agreed that companies must become more productive to absorb the impact
“Investment in modern, automated equipment could help workers deliver more output in less time, cutting waste. This can allow the same amount of work to be completed by, for example, 10% fewer staff. They can then be redeployed to other tasks. The level of investment in this equipment by some businesses has lagged for a long time – now is a real inflection point for them to invest the necessary capital.”
He points out that investment in productivity has been neglected by some companies for some time. UK productivity has only increased by about 5% since 2008, which lags well behind other western economies such as France, Germany and the US.