On 22nd November 2023, the Chancellor announced the new National Minimum Wage increases which will come into effect from 1st April 2024. These changes are a significant increase on the current rate and will undoubtedly have a big impact on small businesses. Read on to find out what these changes are and whether you are ready for the National Minimum Wage increase in April 2024.
What is the National Minimum Wage and National Living Wage?
The National Minimum Wage is the minimum pay per hour almost all UK workers are entitled to. The National Living Wage is a higher rate that workers currently receive if they are over 23 years of age. This qualification age is being reduced to 21 years old and over from 1st April 2024.
What are the National Minimum/Living Wage changes?
The changes are summarised in the table below which shows the comparative hourly rate based on age for 2023 and 2024:
​ | 23 and over | 21 and over | 18 to 20 | Under 18 | Apprentice* |
1st April 2023 | £10.42 | £10.18 | £7.49 | £5.28 | £5.28 |
1st April 2024 | £11.44 | £11.44 | £8.60 | £6.40 | £6.40 |
*Apprentices are entitled to:
the apprentice rate if they are either:
· aged under 19
· aged 19 or over and in the first year of their apprenticeship
or minimum wage for their age if they both:
· are aged 19 or over
· have completed the first year of their apprenticeship
Do I have to pay the National Minimum Wage/Living Wage?
Yes, you must pay the National Minimum Wage unless the worker falls into one of the exempt categories below. The rates are set by the Government to start from April every year and it is illegal not to comply. Workers not paid minimum wage may take employers to an Employment Tribunal where large damages may be awarded and fines levied.
When does National Minimum Wage/Living Wage not apply?
The following categories of workers are exempt from being paid minimum wage
Self employed people
Company directors
Volunteers or voluntary workers
Members of the armed forces
Family members of the employer living in the employer’s home
Non-family members living in the employer’s home who share in the work and leisure activities, are treated as one of the family and are not charged for meals or accommodation, for example au pairs
Workers younger than school leaving age (usually 16)
Students on work experience or a work placement up to one year
People shadowing others at work
Workers on government pre-apprenticeships schemes
People on the following European Union (EU) programmes: Leonardo da Vinci, Erasmus+, Comenius
People working on a Jobcentre Plus Work trial for up to 6 weeks
Prisoners
People living and working in a religious community
What could this mean for my business?
The new national minimum wage rate and the living wage qualification age in the UK will have implications for your business if you pay any employee minimum wage or have apprentices. Of course the extent of impact will depend on your current wage rates, the age distribution of your staff and your overall staffing levels. Here are a few key points to consider:
Increased labour costs: The new minimum wage might lead to an increase in your labour costs, as you'll be required to pay eligible workers the new minimum rate. This could affect your budgeting and overall profitability.
Staff retention and motivation: A higher minimum wage could positively impact staff retention and motivation. Employees may be more likely to stay with your business if they receive a fair and competitive wage. Happy and motivated employees can contribute to a more productive work environment.
Competitiveness within your industry: The new minimum wage may affect your competitiveness within your industry. If your business has high levels of competition, there may be limited opportunity to pass on the increased labour costs via your pricing strategy. This could make taking on new staff and retaining talent increasingly difficult.
What can my business do to prepare for this change?
It is important that your business gets ready for this change. Steps you should take are:
Identify any workers who will fall below minimum wage and make preparations to increase their wages to comply with legislation
Assess your current financial situation and make budgetary preparations or alter plans to reflect the increased wage bill
Review your pricing strategy. Consider whether you can adjust your product or service prices to offset the higher wages, whilst still remaining competitive.
Consider way to improve efficiency and productivity by:
Seeking to raise staff morale
Improving business practices and processes
Increasing automation
What Hummingbird HR Services can do to help
We can provide general HR support on a range of issues, including support in relation to the above topic. Getting support early will help ensure that you are well placed to get the benefit from these changes and not just absorb the costs. This change, if well managed, can present a catalyst for driving further efficiencies.
Comments