Changes to the National Living Wage and Minimum Wage in April 2023

The National Minimum Wage (NMW) and the National Living Wage (NLW) are two of the most important pieces of legislation that govern wages and working conditions throughout the country. The NMW was first introduced in 1999, while the NLW was introduced in 2016.

As an employer, it is important that you understand your duties and responsibilities under the legislation to ensure you are paying your staff correctly and avoiding financial penalties and even prosecution. We’ve compiled a simple guide to help you understand the changes to the National Minimum Wage and the National Living Wage.

Both the NMW and NLW in the UK are reviewed yearly by the government, here’s what to expect from the minimum wage increase this April.

The National Living Wage: covers all workers aged 23 and over and not in the first year of an apprenticeship

The National Minimum Wage: for those workers aged below 23 years and not in the first year of an apprenticeship

New Rates from April 1st 2023

Age Category	New Rate of Pay
Apprentice	£5.28 per hour*
16-17 years old	£5.28 per hour
18-20 years old	£7.49 per hour
21-22 years old	£10.18 per hour
23 years old and above	£10.42 per hour

* This rate is for apprentices aged 16 to 18 and those aged 19 years of age or over who are in their first year of apprenticeships. All other apprentices are entitled to the National Minimum Wage for their age.

April is quite often the time when employers consider their staff wages and employers may now be looking at ways to further support their employees (especially in light of the cost of living crisis) one option to consider is Salary Sacrifice.

What is a Salary Sacrifice Scheme?

Under a salary-sacrifice scheme, employees agree to forego part of their salary in return for non-cash benefits such as pension contributions, which can enable tax and national insurance savings to be made.

Salary-sacrifice schemes are set up with the primary aim of converting cash pay that is subject to tax and Class 1 national insurance contributions to a non-cash benefit that has a different tax or national insurance treatment, thereby making a potential tax (employee-only) and national insurance (employee and employer) saving. The sacrifice is achieved by varying the employee’s terms and conditions of employment relating to pay.

Why should a business consider introducing a salary sacrifice scheme?

Employers should consider introducing salary sacrifice schemes for several reasons:

Attractive Employee Benefits:

Salary sacrifice schemes can be a great way to offer additional employee benefits without increasing the employer’s costs. By allowing employees to sacrifice part of their salary in exchange for certain benefits, such as a company car or private medical, employers can offer attractive benefits that can help attract and retain talented staff.

Tax and National Insurance savings: 

By offering salary sacrifice schemes, employers and employees can save on taxes and National Insurance contributions. This is because the sacrificed salary is not subject to income tax or National Insurance contributions, reducing the tax liability for both parties.

Reduced pension costs:

Salary sacrifice schemes can also be used to reduce the cost of employer contributions to employee pensions. By sacrificing part of their salary, employees can increase their pension contributions without the employer incurring any additional cost.

Environmental benefits: 

Some salary sacrifice schemes, such as those offering electric or hybrid company cars, can also have environmental benefits. By encouraging employees to choose more environmentally friendly options, employers can demonstrate their commitment to sustainability and reduce their carbon footprint.

Of course, as with everything employment-related, you cannot simply introduce a salary sacrifice scheme and you must consult with your staff first.   Implementing a salary sacrifice scheme involves several steps from identifying the benefits; communicating the scheme to staff; consulting with staff; amending employment contracts and setting the scheme up with payroll.  Employers should regularly monitor the effectiveness of the salary sacrifice scheme to ensure it’s achieving its intended goals. This may involve collecting feedback from employees and analyzing the impact on company finances and tax liabilities.

Overall, implementing a salary sacrifice scheme requires careful planning and communication to ensure it’s successful and compliant with all relevant laws and regulations.

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For further help and advice on the changes to the National Living Wage or the changes to the National Minimum Wage or salary sacrifice speak to one of our advisors by calling 01455 444222 or complete our contact form and an advisor will be in touch shortly.