On the 1st of April 2023, the National Minimum Wage (NMW) and National Living Wage (NLW) saw their highest increases on record. All pay periods starting on and after this date will now follow these new rates. But what are the new National Minimum Wage rates, and how will this impact you as a business owner? Continue reading our article to learn more.
What Are The New Rates & How Do They Impact You?
The increase in the National Minimum Wage has been the highest since the NMW began and is being introduced to support the living standards of lower-paid workers. Inflation is now running at around 10%, meaning that the purchasing value of money has fallen, and, therefore, workers require higher pay to live comfortably and afford everyday amenities.
- How Is The National Minimum Wage Calculated?
- What Are The New NMW Rates For 2023?
- How Do The New NMW Rates Impact Employers?
How Is The National Minimum Wage Calculated?
The National Minimum Wage was introduced to protect low-paid workers across the UK without impacting job security or the economy. Each year, the NMW rates are set based on Low Pay Commission recommendations. As an independent body, the Low Pay Commission is responsible for gathering research and advising the government on National Living Wage and National Minimum Wage rates. These rates are generally announced six months before they officially come into action, allowing business owners and other organisations to prepare.
What Are The New NMW Rates For 2023?
The new National Minimum Wage rates for 2023 are as follows:
| Age of worker | Hourly rate from 1st of April 2022 | Hourly rate from 1st of April 2023 |
|---|---|---|
| 23 and above | £9.50 | £10.42 |
| 21 to 22 | £9.18 | £10.18 |
| 18 to 20 | £6.83 | £7.49 |
| Under 18 | £4.81 | £5.28 |
| Apprentice | £4.81 | £5.28 |
How Do The New NMW Rates Impact Employers?
With the new National Minimum Wage rates in mind, as an employer, it is vital to be aware of how these will impact your business. First and foremost, you must be careful not to make any deductions that will reduce the wages of your employees and put them below the applicable NMW rate. For example, withholding money through payroll for employee uniforms, staff means, and subsidised childcare all risk breaking the NMW rules.
If you run a salary sacrifice scheme for childcare (an agreement to reduce cash pay in return for childcare vouchers), it will be vital to check that the amount paid to an employee after the salary reduction still meets the new NMW rate. It may be necessary to redesign your childcare scheme so that it runs outside of payroll. In this case, our team can help you make such arrangements while ensuring that your business remains in the best financial position. Please do not hesitate to contact us to book an appointment to discuss this in more detail.
For those who provide accommodation for employees, you can update your scheme so that the company charges rent instead. This deduction is permitted under the new NMW rules providing that it does not exceed £9.10 per day (before the 1st of April 2023, this was £8.70 per day).
Need Support Managing NMW Rates? Our Team Can Help
As with any government scheme, should any NMW rules be broken, HMRC can impose penalties of up to 200% of the amount of NMW underpaid, up to £20,000 per worker. This makes it vital to ensure that the financial side of your business is set up in a way that complies with the latest regulations.
If you have any questions regarding the new National Minimum Wage and National Living Wage rates and how to adapt your employee pay, our team are always happy to help. Contact us today to set up an appointment with a dedicated accountant.