03 April 2023
Hot off the heels of a 10% rise in National Minimum Wage (NMW) rates this month, initial indications from the Low Pay Commission (LPC) are that from April 2024 NMW rates should rise by a further 7% and the age banding for the National Living Wage should fall from 23 to 21. With this and pension auto-enrolment changes potentially on the way, 2024 could be another year of above average wage cost increases for employers.
The National Minimum Wage is set by the Government on 1 April each year. NMW rates are recommended to the Government by the LPC following consultation with stakeholders including employers, Unions and economists. The Government usually adopts the rates recommended by the LPC.
From 1 April 2023, the National Living Wage rate (payable to workers aged 23 and over) has risen from £9.50 to £10.42 per hour. Workers aged 21 and 22 are now entitled to £10.18 per hour. From next April though, they could be in line for another nearly 10% increase in hourly pay if the Government takes forward the LPCs recommendation to bring the threshold for NMW down from 23 to 21.
The LPC is also anticipating that the apprenticeship rate could be abolished, so that all apprentices are paid the applicable NMW rate based on age. This will be a seen as a positive move, but it is reflective of what some employers already do, either because they consider it to be fair or to avoid the potential for NMW underpayments arising when the apprentice starts working or completes their first year, as so often is the case.
A further inflationary measure on wage bills which may be coming is an increase to pension auto-enrolment costs. Recently, the Government supported the Pensions (Extension of Automatic) Enrolment (No.2) Bill (the Bill) which has just made its way through the House of Commons unopposed. The Bill if enacted would extend pension auto-enrolment entitlement to workers aged 18 and over, rather than the current age of 21 and over, and would abolish the lower earnings limit threshold.
These are early days, but employers will need to keep an eye on both the LPCs’ recommendations, and the passage of the Bill through the House of Lords, for the purpose of forecasting their wage costs for next year and what measures they need to take to remain compliant.
If you have any enquiries regarding NMW or pensions auto-enrolment compliance, please speak to Charlie Barnes.