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The Impact of the Minimum Wage Increase

01 December 2022
The Impact of the Minimum Wage Increase

In the Autumn Statement, Jeremy Hunt announced that the national living wage for those aged 23 and over would increase to £10.42 from April 2023. Here, we explore the impact of the minimum wage increase.

What are the new rates?

From 1 April 2023, the National Living Wage (NLW) (for those aged 23 or over) and the National Minimum Wage (NMW) (for those of at least school-leaving age) shall be:

  • £10.42 for those aged 23 and over
  • £9.18 for those aged 21 to 22
  • £7.49 for those aged 18 to 20
  • £5.21 for those under 18 and apprentices

Apprentices are entitled to the apprentice rate if they are under 19 or aged 19 or over and in the first year of their apprenticeship. Should either of these not apply the apprentice is entitled to the minimum wage for their age.

What are the impacts of the new rates?

The annual earnings of a full-time worker on NLW shall increase by approximately 9.7%, over £1,600. It is expected that over two million workers shall benefit from this increase.

However, there are concerns that the increase is not in line with the current rate of inflation which is currently at 11.1%. The Living Wage Foundation has also highlighted that the rates will still be lower than the voluntary real living wage of £11.95 in London and £10.90 outside the capital. It may be that in order to survive with the current inflation rate, employees request their salary be increased to the real living wage in order to cope with the current cost of living crises.

While those on low salaries will welcome the increase, there are many industries that have taken, or are threatening strike action as those who are on not on minimum wage are still fighting for an increase in salary to reflect inflation. The strike must be related to a dispute between workers and their employer to not be a breach of contract.

What proactive steps can companies take?

There is no doubt that the increase in NLW and NMW shall reduce business profits and with the increase in cost of living, many companies may find themselves concerned about the risk of insolvency. However, there are steps businesses can take to protect themselves.

In most cases, benefits employees receive and premiums they pay, do not count towards NMW. Therefore, companies that are concerned about how they will be able to afford the increase may want to review employee benefits and premiums. However, doing so may involve a change to employees’ contractual terms and therefore employers should start the process, in order to be prepared in time for April.

Unfortunately, in some situations, a genuine redundancy situation may arise where a company cannot afford to maintain the wage roll. If a company is dealing with staff redundancies, it is imperative that the redundancy strategy is correct and that employees are treated fairly, as well as comply with the legal requirements. Failure to do so may result in an Employment Tribunal claim

While most companies survive on customer loyalty, it may be that in order to navigate the increased expenses, businesses may need to pass on the increase to their customers’ costs.

How we can assist

If you would like to speak with an expert employment lawyer to discuss any concerns managing the increase in the NLW and NMW, please contact us via email at contact@davenportsolicitors.com or telephone on 02079036888.

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