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The Coronavirus pandemic has affected us all physically, mentally, and financially, and has had an immense impact on our families, livelihoods, businesses and more. The economy has been hit astronomically and sadly, a downfall in job opportunities and a wave of redundancies has come hand in hand with this unexpected turn of events.

Sadly, those under the age of 25 seem to have been hit the hardest with unemployment and whilst typically sitting within a lower income bracket, it is essential that these individuals are fully supported when taking the first steps back into work.

Thankfully as life slowly begins to return back to normal, we do anticipate an upward trajectory of job opportunities opening up and employment beginning to once again thrive in the UK. As we approach another new financial year, actions have been put into place by the government that aim to tackle the current economic situation and offer key support to those who need it the most. The announcement of the National Living Wage increase from April 2021, is a welcomed effort to protect workers’ living standards.

So, what exactly are the government’s plans to protect those individuals’ for both the present and foreseeable future?

April 2021 wage increases

Following the November 2020 government announcement, the National Living Wage (NLW) and National Minimum Wage (NMW) will face changes from April 2021 in response to the current economic situation.

The National Living Wage is set to increase by 2.2% from £8.72 to £8.91 and will be extended to 23 and 24-year-olds for the first time ever - extending the current NLW which only applies to those aged 25 and over.  

This aims to:

  • Support individuals from the extremely tough effects of the COVID-19 pandemic over the past year
  • Protect and support businesses financial stability, providing hope for the next few years ahead.

The national living wage and national minimum wage changes coming into place from April 2021 shall be as follows:

Rate from April 2020

Rate from April 2021

Increase

National Living Wage

£8.72

£8.91

2.2%

21-22 Year Old Rate

£8.20

£8.36

2.0%

18-20 Year Old Rate

£6.45

£6.56

1.7%

16-17 Year Old Rate

£4.55

£4.62

1.5%

Apprentice Rate

£4.15

£4.30

3.6%

Accommodation Offset

£8.20

£8.36

2.0%

 

You can view more information on the changes here

“In July 2020, Under-25s made up a third of new universal credit claims”(BBC)

What should you be doing as an employer?

As an employer, you will need to ensure that the correct rate is being paid to your employees on a weekly or monthly basis.

To remain compliant,  you should be:

  • Monitoring and keeping up the date with the annual increases and applying these to your employees.
  • Regularly checking and updating payroll databases holding employees’ birthdays. For example, updating payroll when an employee reaches a certain milestone such as 18, 21 or 25.
  • Checking and ensuring you are not entering a salary sacrifice in any way in which could be lowering hourly rate. These could include pension schemes, cycle-to-work schemes, company car.
  • Ensuring your employees are paid the correct rate in any transition of job role. For example, the increase in pay from apprentice rate to normal salary.
  • Ensuring you are not deducting work materials such as uniform or tools from an employee’s payslip.

Failing to comply with the HMRC minimum hourly rates could result in penalties of up to £20,000 per worker, alongside the repayments of any underpayments to the specified employees affected. Not only this, but your company can be named in the media for underpaying your employees, having an indefensible effect on your reputation in your industry.

To read more on employee mistakes when it comes to paying NMW and consequences of breach in minimum wage, you can visit the Gateley website here.