Understanding the 2024 National Minimum Wage Increase

The most recent government guidelines represent a seismic increase in payment rates across the board.

But it’s not as simple as doing a blanket increase in payroll.

At HR:4UK, we have 40 years of experience dealing with payroll adjustments, and by outsourcing your payroll, you can have the peace of mind of knowing that you are compliant.

In November of 2023, the British Government outlined its biggest-ever increase to the National Minimum Wage.

The pay boost is worth up to £1,800 for an adult full-time worker—an increase of almost 10%. The changes also cover younger workers, those in part-time professions, and apprentices.

The UK’s payment structure has always been, at best, a complicated affair. With different wage bands come additional requirements. While the National Minimum Wage has been steadily increasing over time, the announcement comes as the government attempts to improve the standard of living amidst a recession. It’s all part of an aim for the minimum wage to be at least ⅔ of the UK’s median salary.

In the announcement, Bryan Sanderson, the Chair of the Low Pay Commission, conceded that “This hasn’t been easy for employers, with the economy facing a range of unprecedented challenges in recent years.”

While empathy is nice, ultimately, once these changes come into place, they are law, so it’s essential to get them right.

The changes are set to go into effect on the 1st of April, and it’s crucial to know what is coming and how to adapt.

What are the changes?

One of the biggest changes to the National Minimum Wage is, for the first time, the National Living Wage will apply to all workers aged 21 and over (previously applying only to those aged 23 and over).

Here are the coming changes outlined in the table below:

Wage Band	NMW Rates from 1 April 2024	Increase in Pence	Percentage Increase
National Living Wage (21 and over)	£11.44	£1.02	9.8%
18-20 Year Old Rate	£8.60	£1.11	14.8%
16-17 Year Old Rate	£6.40	£1.12	21.2%
Apprentice Rate	£6.40	£1.12	21.2%
Accommodation Offset	£9.99	£0.89	9.8%

In a practical sense, business owners should expect to pay their employees more regardless of age or workplace. However, it can be more complex than just upping pay and being covered.

It’s important to consider how deductions add up, tracking how salary and hours worked change and other offsets such as accommodation.

Penalties

Even if it’s accidental, falling short of minimum wage guidelines can lead to hefty penalties. Fines from HMRC totalled almost £7 million last year.

It’s not just monetary either; HMRC names and shames every company that doesn’t comply with minimum wage laws. This could lead to potential talent turning away from working for a business or even your current employees leaving the company.

In addition to the potential penalties and difficulties that may arise when being named, companies that aren’t compliant risk a lengthy investigation by HMRC. This can include interviewing current workers and an extensive check of a company’s operations.

Getting it wrong can result in widespread difficulties for a business, no matter the size.

How to avoid Breaches:

Breaches can be costly to a company, so avoiding them as much as possible is essential.

There’s a whole host of methods you can use to maintain compliance. Here are some to consider:

• Start early: With a pay-roll increase inevitably comes a change in budget. By starting your payroll management early, you can adapt and make the necessary budget changes to satisfy the new minimum wage requirements.

• Understand calculation rates: It’s essential to understand the different calculation rates that come with changes in the minimum wage structure. For example, it’s necessary to understand and consider what you should pay a 23-year-old worker versus 19 -year-old.

• Review your Payroll: Once you understand the coming calculation rates, it’s a good idea to review your payroll to see who would be underpaid under the new guidelines. Once you know who needs changing, you can begin to take action.

• Know your Employment Structure: A crucial part of staying compliant is adapting to employees with different working conditions. For example, does an employee receive an accommodation benefit, or are they an apprentice? It’s essential to know these so you can pay each employee the right salary.

• Monitor Working Hours: A common issue companies experience is failing to consider the hours an employee works. If an employee works overtime regularly and isn’t compensated for those hours, they may be regarded as underpaid by HMRC.

• Consider Your Deductions: It’s essential to consider the deductions you make from an employee’s salary. Deductions, such as a uniform payment or even punitive deductions for damaged property, must be considered when calculating National Minimum Wages. Employees can be underpaid and violate the updated guidelines if deductions aren’t considered.

• Include all Payment Elements: It can be easy to forget a Christmas bonus or a one-gift. But it’s essential to add them to your salary calculations as they can be crucial to ensuring your employees aren’t underpaid.

• Double Check: It may seem harsh, but the April 1st deadline is a hard one, so it’s worth being as diligent as possible when sorting your payroll, as after that date, any mistakes can lead to an investigation from HMRC.

• Plan for the future: An increase in payroll will lead to a rise in yearly expenditure. It’s worth considering how to adapt your wage bill to fit your budget.

It’s about being as diligent as possible. These processes can be a distraction from a business owner’s ability to focus on their business operations, so you might consider seeking outside help.

It may well be that the Government’s latest National Minimum Wage increase is just one step too much for your business and you are facing the difficult decision on how to manage this. If you’d like to discuss payroll changes, please reach out to us at [email protected] or call us on 01455 444222.

We also offer consultancy services if you need help restructuring your wage bill after the increase.

Finally you can also visit our payroll services page for more information on how we can help your business.