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.
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:
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% |
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.
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.