Advice for changes to National Minimum Wage

Are you ready for the changes to the National Living Wage and Statutory Pay Rates?

Back in November 2020, the government announced increases to statutory pay rates for maternity, paternity, shared parental, adoption and sick leave, as well as increases to the National Minimum Wage and Living Wage, to be implemented in April of this year. April is getting closer by the minute, so we thought we’d have a quick recap on what these changes are and how they might affect you.

What are the proposed changes?

National Minimum Wage / National Living Wage

Following the introduction of the National Living Wage (NLW) last year, which gave some workers a pay rise of nearly £1000 a year, the new rate of pay is set to increase again by 2.2%. This will increase it from £8.72 an hour to £8.91 an hour, with effect from 1 April 2021.

The current NLW rate applies to all workers aged 25 and above however, with effect from 1 April 2021, this will change to become available to workers aged 23 and above. Younger workers will get a pay rise too, with the National Minimum Wage increasing from £8.20 an hour to £8.36 an hour.

 Rate from 1 April 2020Rate from 1 April 2021% Increase
Aged 23 and above (NLW)£8.72£8.912.2%
Aged 21 – 22£8.20£8.362.0%
Aged 18 - 20£6.45£6.561.7%
Aged 16 - 17£4.55£4.621.5%
Accommodation Offset£8.20£8.362.0%

Family-friendly payments

Currently, the weekly rate of statutory maternity pay is £151.20, or 90% of the employee’s average weekly earnings if this is less than the statutory rate. This is expected to rise to £151.97 from 4 April 2021. This is also the proposed date that paternity, shared parental, parental bereavement and adoption statutory pay will rise, again to £151.97 a week. The rule of paying 90% of an employee’s wage if it is lower than the statutory pay will remain the same.

In case anyone missed it last year, the government announced new regulations offering more support to parents who have suffered the loss of a child. Parental Bereavement Leave and Statutory Parental Bereavement Pay entitle bereaved parents to be absent from work, normally with pay at the statutory rate, for up to two weeks. This new statutory right became available to parents from 6 April 2020.

Statutory sick pay

This is set to increase from £95.85 per week to £96.35 on the 6th of April 2021. The lower earnings limit is set to remain the same as last year, at £120 per week.

What does this mean for businesses?

In terms of the increase to the National Living Wage and Minimum Wage rates and the lowered age threshold for the NLW, companies need to make sure they pay all workers that fall into the different age categories accurately. They also need to carefully plan their cash flow to cover the additional cost that these changes will bring to the business. It looks like the government will be resuming their ‘name and shame’ scheme for employers, so we would advise that you review your policies and procedures around pay and working time to make sure your employees don’t fall below the new rates.

While welcoming a new baby into the world is undoubtedly a very happy time for your employee, it can be a worry to business owners, especially those running smaller enterprises. While all organisations can usually claim back at least 92% of maternity, paternity, adoption and shared parental pay, some small businesses are actually able to claim back up to 103%. If you’re not taking advantage of this, we recommend speaking to an accountant.

We’re here to help

If you’re worried about how the proposed changes will affect your business and need professional help planning for and managing them, contact the HR experts at Streetwise HR today on 0844 682 7488.

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