Last month, the government announced one of the biggest minimum wage hikes in recent history when it announced key changes to the minimum wage rates across the UK to take effect in April 2024.
In this article, we explore minimum wage legislation and examine what the increases mean for employers who are already feeling the pressure of the cost of living crisis and who may be struggling to meet their current wage bill.
What are the Current (2023) Minimum Wage Rates in the UK?
In the UK, there are minimum wage requirements that all employers must adhere to, regardless of the size of their company or sector. Employers are free to set their wage rates above the minimum wage requirements, but they must not pay their employees below the levels stipulated under the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 2015.
These rates usually rise in April every year, and they vary according to age. The National Minimum Wage (NMW) rates apply to those of school-leaving age* and above. The National Living Wage (NLW) is the rate of pay for those aged 23 and above.
The current minimum wage rates per hour (April 2023 to March 2024) are as follows:
- Age 23 and over = £10.42
- Age 21 to 22 = £10.18
- Age 18 to 20 = £7.49
- Under 18 = £5.28
- Apprentice rate = £5.28
What Will the Minimum Wage Rates Be In 2024, And Will There Be Any Changes to the Age Brackets?
With effect from 1st April 2024, the National Living Wage will apply to those aged 21 and above, and the new rates will be as follows:
- Age 21 and over = £11.44
- Age 18 to 20 = £8.60
- Under 18 = £6.40
- Apprentice rate = £6.40
Who Is Entitled to Minimum Wage Rates?
The National Minimum and National Living Wage rate applies to all employees and workers, including zero-hours workers, employees in their probationary period, those whose earnings are based on commission, and foreign workers.
Who Is Not Entitled to the Minimum Wage?
Some types of workers are not entitled to the minimum wage; these include (but are not limited to) those who are genuinely self-employed, company directors (please note – directors who have an employment contract are entitled to the minimum wage), those under the school leaving age, and voluntary workers.
*Please see our guide to employing young workers here!
Who Is Entitled to the Apprentice Rate?
The current minimum wage rate for an apprentice applies to those working on recognised apprenticeships. They cannot be paid to someone who simply has ‘apprentice’ or ‘trainee’ in their job title.
The above rate is applicable for apprentices under the age of 19 or someone over 19 but in the first year of their apprenticeship. For example, an apprentice aged 22 can be paid the apprentice rate for the first year of their apprenticeship, but in the second year of their apprenticeship, they will be entitled to the National Living Wage rate.
Can I Make Someone Redundant on the Basis That I Can’t Afford the Increase in Their National Minimum Wage Rate?
The right to be paid the correct rate of the minimum wage is a statutory right. When an employee asserts a statutory right, they should not face a detriment as a result, and an obvious example of such a detriment would be the loss of their role, reductions in pay or other benefits, or increases in their hours of work to ‘justify’ the higher rate of pay.
A redundancy situation arises when work of a particular kind either ceases or diminishes in some way. In order for a redundancy to be fair, it must be a genuine redundancy situation and not used to ‘mask’ other reasons for dismissal. Therefore, if an employee were made redundant and the work they are employed to do is still there, this could give rise to an unfair dismissal claim, even if the employer carried out a fair dismissal procedure.
For more information, please see our guide on when a redundancy is not a redundancy here!
What Steps Can Businesses Take to Prepare for the Increase in Their Wage Bill Due to Rising Minimum Wage Rates?
The financial viability of your business is key to its overall survival. When a business knows its costs are likely to increase due to a rise in the current minimum wage rates, it makes sense to look at ways of saving costs that won’t result in tribunal claims. Here are some of the areas all businesses should focus on:
From poor productivity levels to increases in overtime payments, underperformance can have a serious impact on a business and its finances. If employees are not working to the standards you require, now is the time to investigate why and put measures in place to ensure that employees are working as efficiently and cost-effectively as possible.
If you have concerns about an employee’s performance, contact Avensure at the earliest opportunity so we can assist you in putting measures in place to bring that employee up to standard.
2) Sickness Absence
Sickness absence is a huge cost to businesses. Although all employees will be sick from time to time, employers must keep a close eye on the levels of sickness in their business. Ensure that employees are reporting their absences properly and that return-to-work meetings are carried out on their return. Where sickness absence is high and is not linked to a disability or pregnancy, the employer can manage this via the disciplinary procedure, and Avensure can assist you fully with this.
3) Is Your Organisation’s Structure Fit for Purpose?
If there has been a downturn in work levels, you no longer require the same number of staff and can’t meet the financial demands due to rising national living wage rates; this is a redundancy situation.
Perhaps the levels of work have not been reduced, but you have identified smarter ways of working that may not require the same numbers of staff employed currently, or you feel that existing roles could be combined, merged, or replaced altogether with different positions.
This type of situation is a business restructure. Depending on the circumstances, this may give rise to redundancies, or it may justify making contractual changes to existing contracts of employment. If you are considering making changes to improve the efficiencies of your business, staff reductions and changes to contracts should be a last resort, but the key to an effective restructuring exercise is in the planning. Avensure can assist you and talk you through your options.
Need help complying with the 2024 National Minimum Wage rates? Worried about any impact it could have on your business?
Contact us today and speak with one of our experts about your specific challenges. Discover how Avensure can provide you with the necessary support.
Click here: Avensure Contact!