Changes to the National Minimum Wage (NMW) rates confirmed for 2023/24
The National Minimum Wage (NMW) receives a review every year. There’s no commitment to increase the amount, but the hourly total does change from time to time.
If you pay any of your staff the NMW and you fail to increase their pay correctly, Employers could be breaking the law, as well as given a hefty fine.
With that in mind, here’s everything you need to know and how to remain compliant with the changes.
What is the National Minimum Wage?
The NMW came into force in July 1998 via the National Minimum Wage Act. It defines a minimum hourly rate you should pay your employees and workers.
These rates are subject to review and change in April every year.
In the Autumn statement on 17 November 2022, the first under new Prime Minister Rishi Sunak, it was confirmed that the National Living Wage (NLW), paid to those aged 23 and over, will rise to £10.42 from 1 April 2023, as recommended by the Low Pay Commission (LPC). This increase means that for an NLW worker working 37.5 hours per week, the increases announced today will increase their annual pay by £1798.83 and their monthly pay by £149.90.
This is an increase of 9.7 %, the largest ever increase to the NLW, and ensures that the NLW continues on track to reach the Government’s target of two-thirds of median earnings by 2024.
Changes to the National Minimum Wage (NMW) have also been announced. All of the increases are set out below:
Rate from April 2023
These figures along with a full report and the evidence relied on when calculating these increases will be laid before parliament in the coming weeks.
The LPC recommendations for NLW and NMW rates
The LPC submitted its recommendations on 24 October 2022. The Government has today announced its acceptance of those recommendations.
The LPC’s recommendations on the NLW are informed by a Government-set target for that rate to reach two-thirds of median earnings by 2024. In this year’s remit, the Government asked the LPC
“to closely monitor developments in the labour market, including the impact of increases to the minimum wage rates, and advise on emerging risks. The government remains committed to the 2024 target, but if the economic evidence warrants it, the Low Pay Commission should advise the government to review the target or its timeframe. This emergency brake will ensure that the lowest-paid workers continue to see pay rises without significant risks to their employment prospects.”
Information on NLW / NLW age bands and rates
Following LPC recommendations in 2019, the age threshold for the NLW was lowered from 25 to 23 in April 2021 and is due to be lowered to 21 by 2024.
Rates for workers aged under 23, and apprentices, are lower than the NLW to reflect lower average earnings and higher unemployment rates. International evidence also suggests that younger workers are more exposed to employment risks arising from the pay floor than older workers. Unlike the NLW (where the possibility of some consequences for employment have been accepted by the Government), the LPC’s remit requires us to set the rates for younger workers and apprentices as high as possible without causing damage to jobs and hours.
A note on the NLW and the Real Living Wage
The NLW is different from the UK Living Wage and the London Living Wage, which is calculated by the Living Wage Foundation. Differences include that:
the UK Living Wage and the London Living Wage are voluntary pay benchmarks that employers can sign up to if they wish, not legally binding requirements;
the hourly rate of the UK Living Wage and London Living Wage is based on an attempt to measure need, whereas the National Living Wage is based on a target relationship between its level and average pay;
the UK Living Wage and London Living Wage apply to workers aged 18 and over, the National Living Wage to workers aged 23 and over. The Low Pay Commission has no role in the UK Living Wage or the London Living Wage.
New SSP, SMP etc pay rates for 2023/24 Announced
The Department of Work and Pensions has announced new rates for statutory maternity, paternity, adoption, parental bereavement and shared parental payments to be applied from April 2023, as well as the new rate for statutory sick pay.
The rate for 2023/24 for statutory maternity (SMP), paternity (SPP), adoption (SAP), parental bereavement (SPBP) and shared parental pay (ShPP) will increase from £156.66 to £172.48 per week. Additionally, the rate of statutory sick pay (SSP) is also set to increase from £99.35 to £109.40 per week.
The minimum weekly amount an individual must earn to be entitled to these payments will remain at £123.
Exact dates of implementation are yet to be confirmed, and it is worth noting that they do not all usually increase on the same date as each other. Based on previous years, it is expected that SMP, SPP etc will increase on 2 April 2023 and SSP will increase on 6 April 2023.
Employers who have employees on sickness absence, or maternity leave etc, in the run up to April 2023, must remember to factor in the increases for these employees where their absence continues past the rate change date, as well as employees who go on sick leave, maternity leave etc after the new rates are in place.
This largely completes the statutory rate updates for April 2023, as NMW and NLW rates have already been announced:
