Increased National Living Wage (NLW) and National Minimum Wage (NMW) rates come into force on 1 April 2022. Below are details of the current and new rates for different age groups.
|
Age: |
23 & over (NLW) |
21 to 22 (NMW) |
18 to 20 (NMW) |
under 18* (NMW) |
Apprentice** |
|---|---|---|---|---|---|
|
April 2021 (current) |
£8.91 |
£8.36 |
£6.56 |
£4.62 |
£4.30 |
|
April 2022 (new) |
£9.50 |
£9.18 |
£6.83 |
£4.81 |
£4.81 |
*Under 18 and at least at school leaving age
**Apprentices are entitled to the apprentice rate if they are either:
- aged under 19
- aged 19 or over and in the first year of their apprenticeship
Many local businesses will have to pay higher salaries to young people
Many of our Visionary clients employ young people in the local area around St Albans, Harpenden and London. We are making them aware of the increases to the National Living Wage and National Minimum Wage that take effect from 1 April 2022.
The table above shows that anyone over the age of 23, the National Living Wage will increase by 6.6% from its 2021 level. This seems like good news for young employees as their wage is going up but it is currently struggling to match inflation. However, for anyone aged 21-22 years old who receives the National Minimum Wage, their rate of pay will increase by 9.8% from its 2021 level.
The National Minimum Wage increases by 4.1% for those aged up to 20 years old (and over school leaving age), which is well below the current levels of inflation. For those working under Apprenticeships they will receive an inflation-busting rise of 11.9%
How will the wage increase affect your business costs?
Taking the 23 and over category, and assuming a young person worked a 35-hour week, a local business would have to pay £332.50 p/w to anyone who is 23-years or older after April 2022, compared to £311.85 p/w the previous year. If we assume these employees work for 52 weeks a year, they would earn £17,290 in the year after April 2022, compared to £16,216 in the current tax year. This is an increased cost to the business of £1,073.80 per employee. In addition, employers will incur an increased cost in Employers' NIC (rising to 15.05% from April 2022) and workplace pension contributions.
How will local St Albans employers be affected by the increase in the National Living wage and the National Minimum Wage?
Many local businesses, for example in St Albans, Harpenden and London, will see their wage bill increase because they employ young people or adults on the National Living or Minimum wage. Young adults work in a variety of industries, but many businesses that typically employ younger people include hospitality, services, retail, leisure and wholesale.
If we consider St Albans as an example, there are many pubs, restaurants and hotels where young people are traditionally employed. Similarly, many young people work in St Albans' retail parks sports centres and shopping centres.
How should local businesses prepare for the increase to the National Living Wage and National Minimum Wage?
Tena Wallace, HR & Payroll Director, Visionary Accountants, St Albans said:
‘Firstly, it is essential that every business takes note of the changes due in April and reviews their workers' pay rates where applicable. You will also have to make changes to your payroll systems before April’s change to the National Living Wage and National Minimum Wage. Visionary Accountants work with businesses in Hertfordshire, London and the surrounding area managing the payroll for many small and medium sized businesses who do not have the time or the trained staff to do it in-house. We have many local clients in St Albans, Harpenden and London and we are working with them to prepare for these changes. It can be expensive to run your own payroll in-house so if you would like to consider a more cost-effective option call a member of our accountancy team on 01727 730550 for a free initial consultation.’
Tena Wallace, HR & Payroll Director, Visionary Accountants, St Albans continued:
‘We would also recommend that any business that employs a considerable number of young adults reviews the cost to their business as our example shows that, even if you only employ 10 adults over the age of 23 years, it will cost you nearly £11,000 a year extra to employ them in your business after April 2022 (not including Employers NIC and Pension costs). This will affect your profitability, so you should prepare your finances accordingly. At Visionary Accountants our qualified accountants work with local businesses to help them with their strategic planning, so they budget for increased costs well ahead of time. If you are interested in changing accountant and want to get more information about how we can help your business achieve its growth targets, please call our sales team on 01727 730550 for a no obligation quotation.’