In the November budget, the government announced that the National Living Wage will rise to £10.42 from 1 April 2023, which represents an increase of 92 pence or 9.7 per cent.

This is in-line with the Low Pay Commission’s recommendations to ensure the National Living Wage reaches the target of two-thirds of median earnings by 2024. 

While this is good news for workers, the implications for businesses could be more problematic. This represents the largest ever increase for the minimum wage in the UK and will take place against the backdrop of a tight labour market in which many companies are struggling to attract talented individuals to their workforce. 

There is a misconception that compliance with minimum wage increases is as simple as ensuring the correct hourly rate is paid. There are many pitfalls which businesses can fall into (often based around deductions) if they aren’t properly prepared. See the section below for examples. Please note: we always recommend speaking with a member of our team directly to ensure that everything is in order with your payroll and compliance as the new National Living Wage comes into effect. 

The Department for Business, Energy and Industrial Strategy (BEIS)’s has published its National Minimum Wage naming and shaming list. The list shows 191 companies which have underpaid their workers, including large, household names. It is important to note that not all of these breaches are intentional, however, with many of the listed companies simply unaware that they are non-compliant.

The latest government statistics show that 47% of businesses caught out for non-compliance with minimum wage legislation had wrongly deducted expenses such as uniform from their employees, taking their pay under the minimum wage threshold. 30% of the businesses had failed to pay for extra hours worked/overtime and almost 20% had paid an incorrect apprentice rate.

Because this is not technically tax legislation, it is not covered by the Taxes Management Act and, therefore, the rules and penalty charges are enforced quite rigidly with very few exceptions being made. 

It is important to remember that minimum wage doesn’t only apply to the lowest paid workers. Even the most senior person in the company must be paid at least minimum wage for the hours they have worked. This means that they can’t, for example, sacrifice their entire income to their pension.

Other aspects of pay including unsociable hours and bonuses cannot be included in the minimum wage. Please note that this information is general, get in touch to discuss your individual circumstances and compliance status.