Last reviewed 4 March 2022
The National Minimum Wage and National Living Wage, as well as other statutory payments, will be rising next month. This comes at a time of significant increases to the cost of living and will be welcomed by low-income earners across the UK.
However, many businesses are still recovering from the ravages of the pandemic, and now have the new threat of disrupted supply chains, sanctions and other issues as a result of the Russian invasion and its impact on Ukraine and surrounding nations.
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. We outline these changes below, and what employers need to think about in implementing these.
National Minimum Wage (NMW) and National Living Wage (NLW)
Rate from 1 April 2021
Rate from 1 April 2022
Workers aged 23 and over (NLW)
Apprentices under 19, or over 19 and in the first year of the apprenticeship
NLW payments for workers aged 23 and over (this was extended to 23-year-olds, down from 25, 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 continuance 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 “name 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, if Wilhelm gets paid monthly on the 15th, the old rate will continue to apply until the next pay reference period, beginning on 16 April. Therefore, Wilhelm will get the old rate between April 1 and 15, 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 2022 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 2022. Statutory sick pay will also increase on that date from £96.35 to £99.35.
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 2022. 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”, which, whilst optional, would be good to remind employees why there is quite 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, Susie, works 3 days a week, she will get 3 x £31 SGP from 6 April 2022.
Time to prepare
April is nearly upon us, and employers need to act now to make sure they are aware of any workers that are getting a pay rise in April 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.