Changes to the National Minimum Wage and National Living Wage

Parliament has considered the draft National Minimum Wage (Amendment) Regulations 2022, which implement increases to the National Living Wage (NLW) and National Minimum Wage (NMW) rates from 1 April 2022. These changes are consistent with the recommendations made. by the Low Pay Commission (LPC) and accepted by the government in October 2021.

As a reminder, the NLW is the lowest amount that can legally be paid to workers aged 23 or over. This should not be confused with the “real living wage”, which is an amount independently calculated by the Living Wage Foundation (a campaign group) based on what it considers employees must earn to get by. to go out. Real Living Wage is paid voluntarily by some UK companies, but is not compulsory.

The tariff changes to NMW and NLW are shown in the table below and will come into effect from April 1, 2022.

It was also confirmed that the government has accepted the LPC’s recommendation to remove the NMW exemption for live-in domestic workers and that these workers should be paid to the NMW in the same way as other workers. Legislation to remove the exemption will be introduced in due course.

Significant increases in NLW and NMW from April 2022 will mean that NMW legislation may become relevant to even more employees than usual. Employers should remember that the NMW is not only relevant for workers paid by the hour, but should also be considered for employees who receive a salary. The higher rates could bring workers closer to NMW once the increase is implemented. Employers will also need to be aware of other factors that may cause an employee to fall below the NMW or NLW, such as wage sacrifice plans and late payments of more than one wage reference period.

Employers should remember that if they fail to comply with NMW or NLW legislation, they face an HMRC investigation, prosecution and government ‘name and shame’.

Michael A. Bynum