The Government has recently announced the new National Minimum Wage rates, which come into force from April 2022. The announcement follows the annual recommendations released by independent body the Low Pay Commission (LPC) and reveals a large increase at all levels.
What were the recommendations of the LPC?
The LPC is a social partnership public body consisting of nine commissioners from employee representative and independent backgrounds which is tasked with advising the Government each year on the rates of the National Minimum Wage.
On Friday 22 October the LPC submitted the following recommendations and comments to the Government:
- Following the improved economic situation in the aftermath of the events of 2020, the National Living Wage should be increased to £9.50 to reach two-thirds of median wages;
- 21-22 year olds should be moved onto the National Living Wage by 2024;
- To avoid a large step change in the year they become eligible, the Government should reduce the gap between the 21-22 Year Old Rate and the National Living Wage by increasing the 21-22 Year Old rate to £9.18;
- In order to balance the aim to stay in line with underlying wage growth and ahead of inflation with higher risk of unemployment for those aged 20 and below by introducing a rate of £6.83 for 18-20 Year Olds and a rate of £4.81 for 16-17 Year Olds;
- Following the 2021 commitment to align the Apprentice Rate with the 16-17 Year Old Rate over two years, an increase to £4.81 for the Apprentice Rate.
- To increase the Accommodation Offset Rate in line with underlying wage growth to £8.70 with an intention to review the operation of the Accommodation Offset in the 2021 recommendations. The Accommodation Offset rate is taken into account when calculating the National Minimum Wage or National Living Wage where an employer provides an employee with accommodation;
- That Regulation 57(3) of the National Minimum Wage Regulations 2015 (the Regulations) should be removed. Under this exemption, live-in domestic workers who are treated as a member of the family are not entitled to receive the National Minimum Wage or any salary at all;
- That the increases in the National Living Wage from 2016 to 2019 reduced inequality between and within UK regions with no strong evidence of large-scale adverse employment effects. A fuller review will be published next year in order to avoid conflation with the effects of the pandemic; and
- Minimum Wage coverage is higher for women, disabled workers and for some (but not all) ethnic minorities, reflecting occupational segregation. There is no evidence to suggest a fall in employment retention associated with the National Living Wage
National Minimum Wage Rates 2022-23
The Government followed all recommendations of the LPC for the 2022-23 rates. Please find the rates set out below.
| Rates from April 2022 | Current Rate (April 2021 to March 2022) | Increase | |
| National Living Wage | £9.50 | £8.91 | 6.6% |
| 21-22 Year Old Rate | £9.18 | £8.36 | 9.8% |
| 18-20 Year Old Rate | £6.83 | £6.56 | 4.1% |
| 16-17 Year Old Rate | £4.81 | £4.62 | 4.1% |
| Apprentice Rate | £4.81 | £4.30 | 11.9% |
| Accommodation Offset | £8.70 | £8.36 | 4.1% |
How has the Government’s National Minimum Wage Announcement been Received?
Chancellor Rishi Sunak has commented that the increase ‘ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament’. Chief secretary to the Treasury Simon Clarke has reiterated these comments and regards the increase as a ‘really important protection’ against the current cost of living.
However the announcement has not come without criticism and Labour’s Shadow Chief Secretary to the Treasury, Bridget Phillipson, has described the increase as an ‘underwhelming offer’ that would be mostly swallowed up by tax rises, universal credit cuts and higher energy bills.
The Living Wage Foundation, which independently calculates its own real living wage for employers who voluntarily adopt such rates, has raised the rate to £9.90. The rationale behind this change is pinned to higher fuel costs and rents. Katherine Chapman, director of the Living Wage Foundation, has said that higher pay is essential, particularly due to the effects of the pandemic.
What does the National Minimum Wage Increase mean for Employers?
The large rise in the Living and Minimum Wage Rates will require employers to take stock of any practices in pay that would place employees at risk of being paid below those rates. This is particularly true for employers who employ apprentices and 21-22 year olds, the groups of employees who will see the greatest comparative increases in pay. Similarly, the LPC has recommended that 21-22 years olds should be moved to the National Living Wage in the coming years and employers who employ this demographic should keep a watchful eye on the 2022 wage announcement.
Employers providing accommodation for their staff should also monitor any recommendations from the LPC in 2022, following the body’s comments on potential future changes to the operation of the rate.
Whilst sales commission and performance-related pay will contribute to an employee’s wage in addition to their basic pay for the purposes of calculating minimum wage, employers should be wary of other payments which are not taken into account. These payments continue to include loans, advances of wages, pension payments, retirement lump sums, redundancy payments, premiums, allowances and tips or gratuities.
Likewise, certain benefits in kind such as meals, fuel, a company car, childcare vouchers and medical insurance must not result in an employee’s average hourly pay falling below the minimum wage.
As a result of The National Minimum Wage (Amendment) Regulations 2021 employers must now maintain sufficient records to show that national minimum wages have been paid for the previous six years, an increase from the original three years. It is a criminal offence to fail to keep such records.
Finally, employers should also ensure that they continue follow the Regulations or face being ‘named and shamed’ by the Government, who in August 2021 released the names of 191 employers who failed to pay minimum wages.
This article is for general information only and does not, and is not intended to, amount to legal advice and should not be relied upon as such. If you have any questions relating to your particular circumstances, you should seek independent legal advice.