March 14, 2024 National Minimum Wage & the National Living Wage
In November 2023 initial proposals were set out to increase the National Minimum Wage (NMW) from 1st April 2024. The announcement from the Chancellor at the time also explained how the current age to receive the National Living Wage (NLW) will be reduced from 23 to 21. This was confirmed in the Spring Budget on the 6th of March 2024 and the following information has been compiled to ensure our clients have the most up-to-date information and remain compliant with the latest legislation.
Changes to Wages
| Current Rate | New Rate | Increase | |
|---|---|---|---|
| National Living Wage | £10.42 (*23 years+) | £11.44 (*21 years+) | 9.8% |
| National Minimum Wage (18-20 years old) | £7.49 | £8.60 | 14.8% |
| National Minimum Wage (16-17 years old) | £5.28 | £6.40 | 21.2% |
| National Minimum Wage (apprentice rate) | £5.28 | £6.40 | 21.2% |
As can be seen in the table above, the tiered system for hourly rates is determined by the age of the employed staff member. The National Living Wage (NLW) is a term given to the highest bracket of the National Minimum Wage. Those that will be 21 and over from 1st April, will be entitled to the National Living Wage which will rise from £10.42 per hour to £11.44. At 9.8%, this is the biggest increase employees have seen in recent years. For an average worker completing 37.5 hours per week, this would mean a gross increase of £1,989 to their annual salary representing an increase from the previous salary of £20,319.
National Living Wages v Real Living Wage
The Real Living Wage (RLW) is an hourly rate that has been set by the charity, The Living Wage Foundation, and is based upon what the charity believes is an acceptable wage to be able to live. The current RLW is £12 per hour outside of London and £13.15 per hour in the Capital. As this is unofficial, this is not a legal requirement but more a suggestion of what is fair to employees across the UK. There are currently 14,000 employers that have adopted the RLW benefitting 460,000 employees. The rates for 2024/25 have yet to be released for the RLW however it will be equal to, if not greater than the current increase for the NMW and the NLW.
Our View
As a payroll professional, I applaud these increases in wages for the lowest earners. However, it remains the case that low wages are often supplemented by a system of benefits, allowances and tax credits paid for through general taxation. It is our view that this system is overly complex and expensive to administer, and we would welcome further increases in minimum wages offset by a reduction in allowances and tax credits.
Personally, I think there is still a way to go for future governments. Putting more money in the pocket of minimum wage employees should benefit local economies.
How we can help
If you have employees who receive the NMW or the NLW, you must increase those wages by 1 April 2024.
As a client of Elemental, we ensure that you are kept abreast of changes in legislation as part of our comprehensive payroll and pension compliance service. As always, please feel free to reach out to your usual contact to discuss these or any other changes from Budget 2024.
