With the National Minimum Wage and other statutory payments rising in April 2022, Croner-i examines the changes and their impact on businesses
While these payment increases come at a time of significant rises to the cost of living and will be welcomed by many across the UK, businesses are still recovering from the pandemic and now face the threat of disrupted supply chains, sanctions and other issues resulting from the Russian invasion of Ukraine and its impact on surrounding countries.
Increases to statutory payments will need to be factored into financial plans for the coming tax year and businesses need to take steps to ensure they are ready for these changes, which we outline below.
National Minimum Wage (NMW) and National Living Wage (NLW)
|Age||Rate from 1 April 2021||Rate from 1 April 2022||Percentage increase|
|Workers aged 23 and over (NLW)||£8.91||£9.50||6.60%|
|Apprentices under 19, or over 19 and in the first year of the apprenticeship||£4.30||£4.81||11.90%|
NLW payments for workers aged 23 and over (this was extended to 23-year-olds in April 2021) is set to increase by 6.6%, from £8.91 per hour to £9.50 per hour. This is the biggest increase to the NLW since its introduction and keeps the government on track to reach its commitment for the NLW to be equal to two-thirds of median earnings by 2024.
These increases are a continuation of Boris Johnson’s ‘levelling up agenda’ and his goal to move towards a high-wage, high-skill, and high-productivity economy. Other significant increases are seen for 16‒17 year olds and those aged between 21 and 22.
Since the changes to the NMW/NLW age bands in 2021, there are now five different bands employers must deal with. There are only short gaps between these bands, which can catch out employers who are not carefully keeping up to date with important anniversaries, such as birthdays and apprentices moving into their second year. Indeed, 16% of those ‘named and shamed’ in December 2021 for failing to pay NMW/NLW gave the reason as failing to increase pay in line with the individuals entitlement, either due to the rate change in April or an important anniversary.
Employers must be careful to pay this increase on time. This means in the next ‘pay reference period’ after the increase has taken affect, which may mean that pay does not increase for the individual until some way into April. The ‘pay reference period’ is the period within which the pay is calculated. For example, for an employee who gets paid monthly on the 15 April, the old rate will continue to apply until the next pay reference period, beginning on 16 April. Therefore, the employee will get the old rate between 1-15 April, and the new rate from 16 April. It may be necessary to inform employees of this, depending on when the pay reference period falls, to avoid any confusion or accusations of failure to pay properly.
Family-friendly statutory payments
Alongside minimum wage increases there are also other increases that will take effect in April, including family friendly payments, which from 3 April will increase to £156.66 from £151.97 (this includes maternity, adoption, paternity, shared parental and parental bereavement pay).
Employers are therefore going to have to increase the payments for any employees currently away from work on paid family leave, from the date of the increase (3 April 2022).
Statutory sick pay (SSP) and the lower earnings limit (LEL)
The LEL will increase for the first time in two years, rising from £120 to £123 from 6 April. Statutory sick pay will also increase on that date from £96.35 to £99.35.
Daily Rates for Statutory Sick Pay: 2022‒23
|Unrounded daily rates||Number of qualifying days in week||1 day to pay||2 days to pay||3 days to pay||4 days to pay||5 days to pay||6 days to pay||7 days to pay|
National Insurance increase
Another change is the increase to National Insurance payments by 1.25% from April. Payroll is going to need to be adjusted, to meet the new legal obligations and make the correct deductions.
HMRC has also asked employers to include the following message on all payslips between 6 April 2022 and 5 April 2023: “1.25% uplift in NICs funds NHS, health and social care”. While this is optional, it is worth reminding employees why there is a dent in their pay packet. Letting staff know about this in advance, that it has been mandated by the government, and how it will impact their take home pay, will allow them to prepare. Some employees may be upset about this but there is no obligation to cover the difference in net pay.
Statutory guarantee pay
Statutory guarantee pay (SGP) is another area that has not seen an increase in two years. SGP is the payment made while an employee is laid off (asked not to work), and is a daily rate paid on any days where an employee is laid off, to a maximum of a normal working week, every 13 weeks. For example, if any employee works 3 days a week, they will get 3 x £31 SGP from 6 April.
Time to prepare
April is now here and employers need to act swiftly to make sure they are aware of any workers that are getting a pay rise so it can be implemented smoothly when the time comes. It must also be noted that these increases happen on different days in early April, so care will need to be taken to ensure correct payments are made when the time comes.
In-depth guidance on payment and employee entitlement in the passenger transport industry is available as part of a subscription to Navigate-Transport and free access to Navigate-Transport Lite is available to routeone members.