Payroll – National Minimum Wage increases
The National Living Wage and National Minimum Wage rates have seen significant increases from 1 April 2023.
From 1 April 2023, the National Living Wage (for those aged 23 and over) increased by 9.7% to £10.42 per hour. Rates for younger workers and apprentices have also seen similar percentage increases.
For employers, these increases represent a significant rise in wage costs and associated National Insurance and pension contributions. It is vital to ensure your payroll systems are updated and that you remain compliant with the latest rates.
Impact on salary sacrifice
Employers must be careful when operating salary sacrifice schemes (such as for pensions or cycle-to-work). A salary sacrifice cannot legally reduce an employee's cash earnings below the National Minimum Wage. With the rates increasing so significantly, many employees who were previously comfortably above the limit may now fall foul of this rule if their salary sacrifice arrangements are not reviewed.
Record keeping
HMRC is strict on NMW enforcement. Employers must keep detailed records of hours worked and pay received to prove compliance. Failure to pay the correct minimum wage can result in hefty fines, being publicly named and shamed by the government, and the requirement to backdate any underpayments to the affected staff.
Disclaimer
The information contained in this article is for general guidance on matters of interest only. It should not be used as a substitute for consultation with professional accounting, tax, legal, or other competent advisers. Before making any decision or taking any action, you should consult a Kingscott Dix professional.