National Living Wage and Minimum Wage Increases April 2021
The Chancellor has announced that the rate of the National Living Wage will increase from £8.72 to £8.91, with corresponding increases to all the underlying national minimum wage rates, from April 2021. Importantly, the NLW (a higher rate than the NMW) will also now apply for those aged 23 and above (previously it was for 25 and up only).
The new rates that will come into effect:
| Rate from April 2020 | Rate from April 2021 | Increase | |
| National Living Wage *
Workers aged 25 and over |
£8.72 | £8.91 | 2.2% |
| 21-22 Year Old Rate * | £8.20 | £8.36 | 2.0% |
| 18-20 Year Old Rate | £6.45 | £6.56 | 1.7% |
| 16-17 Year Old Rate | £4.55 | £4.62 | 1.5% |
| Apprentice Rate | £4.15 | £4.30 | 3.6% |
| Accommodation Offset | £8.20 | £8.36 | 2.0% |
*From 2021, the NLW will be extended to cover all adults aged 23 and above
The Government has confirmed that it followed the recommendations of the Low Pay Commission in full when setting the rates. The LPC have freely admitted that making those recommendations “in the midst of an economic crisis coupled with a pandemic [was] a formidable task“. In its press release (quoted here), the LPC confirmed that “there are strong arguments concerning both low-paid workers – many performing critically important tasks – and the very real solvency risks to which small businesses are currently exposed“. Essentially, the rise had to be enough to keep people off the poverty line, but not so high as to send businesses which are already struggling over the line into insolvency.
The reality may be that many employers are simply not able to increase employee pay at the same rate as increases to NLW/NMW. This is not just about those at the bottom of the payscale but those higher up – increases to the minimum rates where movements cannot be made at higher levels will produce considerable compression of wage bands and all the employee unhappiness which that can create. More employers are now paying more people at or around the NLW/NMW than ever before.
We recommend that employers review their policies around pay and working time for the impact it will have on their workforce. Considerations need to include, but is not limited to, elements around working time, salary sacrifice schemes, travel schemes and uniform deductions. Additionally, salaried workers pay should be calculated on the basis of 52.143 weeks per year according to HMRC rules.
Record Keeping
There is a requirement under the NMW Regulations to maintain sufficient records to evidence that the NMW has been paid for at least the last 3 years. It is a criminal offence not to do so.
Breaches
The Government publishes the names of employers found to have been in breach of the National Minimum Wage regulations. HMRC will go back up to 6 years in NMW pay investigations and employers found to be paying less than the legal wage face significant fines in addition to back pay to affected employees (subject to an overall cap of £20,000 per affected employee. This is a big incentive for businesses to audit their pay and working practices sooner rather than later.
How we can help
We can offer comprehensive support to employers and carry out a pay audit to ensure compliance with the regulations. You can also take advantage of our salary benchmarking tool to assess pay against your industry sector, company size and geographical area.
Call us on 01626 563101 or email hrsupport@commissioninghr.co.uk to discuss your pay practices.
