Last reviewed 29 October 2021

With promising signs of the economy picking up from the ravages of Covid, many were eager to see what the budget had in store for them. The £3.8 billion for skills improvements in adults, especially numeracy, has certainly been a bonus for employees, as employers have previously reported that school leavers lack basic skills. Some, however, will be wary of the increase in the national minimum and living wage, and what that will mean for profits.

Chancellor Rishi Sunak has announced the following increases in national living and minimum wage, from April 2022:

Age

Rate from 1 April 2021

Rate from 1 April 2022

Percentage increase

Workers aged 23 and over (NLW)

£8.91

£9.50

6.6%

21–22

£8.36

£9.18

9.8%

18–20

£6.56

£6.83

4.1%

16–17

£4.62

£4.81

4.1%

Apprentices under 19, or over 19 and in the first year of the apprenticeship

£4.30

£4.81

11.9%

The increase is a continuance of Boris Johnson’s “levelling up agenda” and his goal to move towards a high wage, high skill and high productivity economy.

It's expected that a similar increase will be applied to payments associated with family-friendly leave. For example, maternity, paternity, adoption, shared parental and parental bereavement pay. The increase will likely also be in place for statutory sick pay entitlements, however this may mean a subsequent rise to the lower earnings limit, for which employees must meet to be eligible for most statutory payments.

There were no changes to statutory guarantee payments (SGP) in April 2021 and it is unclear if this will be the same this time around. The end of the Job Retention Scheme may instigate a rise in employees being placed on lay off or short-time working, which could see them being paid SGP.

The extension of the Kickstart Scheme and implementation of the JETS Scheme will support unemployed individuals into skilled jobs. However, other than the increase in skills funding, no announcements have been made of help available for the currently employed.

Another change to prepare for is the plans to increase national insurance payments by 1.25% from April 2022, which from April 2023 must appear as a separate deduction on payslips as a “social care levy”. Payroll will need to be adjusted from next April to meet the new legal obligations and make the correct deductions. 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 give them an opportunity to prepare. Some employees will be understandably upset about this but there is no obligation to cover the difference in net pay.

Employers are urged to start preparing for these changes now, building them into their plans for the coming years so as not to be caught out.