In this week’s Q&A, Croner-i experts explain the April increases to national minimum wage rates and how to avoid breaching the rules

My client has approached me about the increases to national minimum and living wage (NMW/NLW) from April. They are worried about breaching the rules, as paying a fine will be more costly than ever. I would like to reassure them and explain common breaches of NMW/NLW, so they know what to avoid.

From 1 April 2023, the following increases to NMW/NLW will come into force:

National living wage	Rate from April 2023	Rate from April 2022	Increase %
23 years old plus	£10.42	£9.50	9.7
21-22 year old rate	£10.18	£9.18	10.9
18-20 year old rate	£7.49	£6.83	9.7
16-17 year old rate	£5.28	£4.81	9.7
Apprentice rate	£5.28	£4.81	9.7

The increases apply in the next ‘pay reference period’ after the increase. For example, if X gets paid on the 15th of the month, the old rate applies until the 15th, and the new one from the 16th. To avoid misunderstandings, your client might want to explain this to their staff.

Falling foul of the law

The consequences of failing to pay NMW/NLW can be costly:

• fines at 200% of arrears (reduced to 100% if paid within 14 days, subject to a maximum of £20,000 per unpaid worker);
• repayment of arrears, calculated at the current rate of NMW/NLW;
• criminal proceedings for the most serious breaches.

Common mistakes

Keeping up with entitlement

16% of those publicly ‘named and shamed’ by the government for breaching the NMW/NLW blamed failing to increase pay in line with entitlement. Your client should therefore be careful keep on top of employee birthdays.

If your client employs apprentices, that rate is only paid in the first year; thereafter, only to those under 19. Your client should therefore be aware of when they:

• move into year two (if 19 and over);
• turn 19 (after year one); and
• finish their apprenticeship.

These events mean they must be paid the appropriate NMW/NLW rate from the next ‘pay period’.

Deductions

Certain deductions can cause pay to fall below NMW/NLW, and not breach the law, such as income tax and National Insurance; recovery of accidental overpayment or pay advances; pension contributions; student loan repayments; trade union fees; and accommodation offsets.

However, other deductions and expenses can be unlawful and lead to an underpayment of NLW/NMW. These include deductions for:

• tools;
• uniforms;
• travel costs (except commuting costs); and
• training courses.

For example, where an employee must purchase a uniform, their total pay minus the uniform cost cannot be below the applicable NLW/NMW rate.

Working time

Where travelling is essential to the job, eg, delivery drivers / travelling salespeople / domiciliary carers, they should be paid to travel between clients. Time spent travelling from home to their starting point (their commute) need not always be.

Trial shifts

This depends on whether the trial is to test ability or provide value. Working a normal shift where they are not observed or given guidance is likely to attract the need to pay NMW/NLW.

For example:

• chef prepares dishes under observation – likely a genuine trial, no pay entitlement;
• chef works a kitchen service and is left to work alone – likely providing value and not a genuine trial, NMW/NLW due.

Please also note other changes from April:

• family friendly statutory payments increase from £156.66 to £172.48 on 2nd April 2023;
• statutory sick pay (SSP) increases from £99.35 to £109.40 on 6 April 2023.

Subscribers to the Croner-i VIP Tax Team service have access to our consultancy team who can provide a written report involving a full briefing of the scenario involved.

Remember, members of our VIP Tax Team service can call our priority advice line for instant help with tax, VAT and employment queries such as this.

The National Living Wage and National Minimum Wage rise comes into effect from 1 April 

Announced in the Autumn Budget last year by the Chancellor, from 1 April the National Living wage rate rises 6.6% from £8.36 to £9.50.

According to the Department for Business, Energy, and Industrial Strategy (BEIS), the increase in the hourly rate will apply to about 2.5m people which will put £1,000 a year more into full-time workers’ pay packets.

The National Living Wage is the government’s set minimum rate that employers must pay staff aged 23 and over for each hour worked. If you’re over 23, you are legally entitled to the National Living wage, however if you’re under 23, you are only entitled to the National Minimum Wage, which varies based on your age.

The complete list of minimum wage increases from 1 April is as follows:

National Living Wage: £9.50 up from £8.91 (6.6% increase)

21-22 year-old rate: £9.18 up from £8.36 (9.8% increase)

18-20 year-old rate: £6.83 up from £6.56 (4.1% increase)

16-17 year-old rate: £4.81 up from £4.62 (4.1% increase)

Apprentice rate: £4.81 up from £4.30 (11.9% increase)

Accommodation offset: £8.70 up from £8.36 (4.1% increase)

Business secretary Kwasi Kwarteng said: ‘We have never been more determined to make work pay, and by providing the biggest cash increase ever to the National Living Wage, we are giving a boost to millions of UK workers.

‘While no government can control the global factors pushing up the cost of everyday essentials, we will absolutely act wherever we can to mitigate rising costs.

‘With more employees on the payroll than ever before, this government will continue to stand up for workers.’

Even with the increase in wages, many have expressed concern and criticised the Chancellor stating that the rise in wages will not be enough to support families facing the current cost of living crisis.

Energy bills are set to rise dramatically as the price cap increases from £1,277 to £1,971 as of 1 April and the cost of groceries, National Insurance contributions, and VAT on eating and drinking are all set to rise at the same time.

As well as the National Living Wage, there is also an unofficial and voluntary ‘real living wage’. This is calculated by the Living Wage Foundation, a campaigning organisation, and is based directly on cost of living.

According to the Foundation, the ‘real’ living wage is currently £9.90 an hour for workers across the UK and £11.05 in London, almost a pound above the mandatory National Living Wage.

The Treasury has announced that the National Living Wage will increase next April to £9.50 per hour. This represents a 6.6% increase. These new rates will be effective from 1 April 2022.

From April 2022, minimum pay rates will increase as below.

• NLW (workers aged 23+) — from £8.91 to £9.50 per hour.
• NMW rates:
  • workers aged 21–22 — from £8.36 to £9.18 per hour
  • workers aged 18–20 — from £6.56 to £6.83 per hour
  • workers aged 16–17 — from £4.62 to £4.81 per hour
  • apprentice rate — from £4.30 to £4.81 per hour.