• 13 APR 17
    National minimum wage: what the increase means for your business

    National minimum wage: what the increase means for your business

    The national minimum wage refers to the basic hourly rate of pay which workers must be paid based on their age. The rates of the national minimum wage increase each April to ensure workers across the UK are paid fairly.

    Employment law expert Amy Richardson explores the latest changes and explains what they mean for businesses.

    Who do the changes apply to?

    The new minimum pay rate, which came into effect from April 1, applies to all employers in the UK.

    Firms must legally pay all workers of school leaving age the national minimum wage.

    While the rules apply to the majority of UK workers, certain groups are excluded from the national minimum wage, including the self-employed, volunteers and members of the armed forces.

    What are the changes?

    Employees aged 25 and over must now be paid £7.50 an hour, up from £7.20 prior to April 1, with the following statutory national minimum wage increases applying to all other age bands:

    • Employees aged 21-24 must be paid £7.05 an hour, up from £6.95,
    • The rate for 18-20-year-olds has increased from £5.55 to £5.60 per hour,
    • Those aged 16-17 must be paid a minimum of £4.05 per hour, up from £4.00,
    • The rate for apprentices has risen from £3.40 to £3.50 an hour.

    In addition to the new higher national minimum wage, employers must also pay their workers higher rates of statutory maternity, paternity, adoption and shared parental pay, as well as increased sick pay.

    From April 2, the standard rate of family-related pay – statutory maternity, paternity, adoption and shared parental pay – has increased from £139.58 to £140.98 per week. If 90 per cent of the worker’s average weekly earnings are lower than this, then that is the rate that should be paid.

    The standard rate of statutory sick pay has also risen from £88.45 to £89.35 per week, with effect from April 6.

    How are the rules enforced?

    It is illegal for employers to pay their staff rates which don’t meet the national minimum wage.

    If you discover an employee has accidentally been paid below the new minimum rate, then arrears must be paid immediately.

    The rules are enforced by HMRC through a number of measures. Known low paying sectors will be targeted by specific government enforcement initiatives, while HMRC will also investigate any complaints from workers or third parties.

    How will the changes affect my business?

    Businesses may choose to increase their prices for the goods or services that they offer in order to compensate for the cost increase associated with the national minimum wage changes.

    Some businesses may also resort to more automated methods of working by using machines and thereby cutting the use of labour, however the most effective way of dealing with the increase will be to increase productivity of the workforce. Higher pay may by itself lead to higher productivity but employers should consider further training of both management and members of staff.

    For more information on the changes to the national minimum wage, or for advice on any employment law matter, contact Amy Richardson on 0161 761 4611 or email her at amy.richardson@whnsolicitors.co.uk