Big changes announced for the National Living Wage
In November 2020, the Chancellor of the Exchequer announced big changes to the National Living Wage. And these could have a major impact on how much you pay your staff from April 2021.
Lower age threshold for the National Living Wage
From April 2021, the age threshold for the National Living Wage will drop to 23. Those under 23 will still be entitled to National Minimum Wage. The amount you need to pay your employee will depend on which age range they fall into (more on this shortly).
Increase in National Living and National Minimum Wages
In addition to the lower age threshold, the National Living Wage will also increase by 2.2% from ￡8.72 per hour to ￡8.91 per hour.
For 23- and 24-year olds currently earning minimum wage, the new threshold will mean they take home 71p more per hour. That’s an 8.7% increase in pay.
The other minimum wage rates are also set to increase from April. Based on the recommendations by the Low Pay Commission (LPC), the new rates will be as followed:
- National Living Wage: ￡8.91
- 21-22 Year Old Rate: ￡8.36
- 18-20 Year Old Rate: ￡6.56
- 16-17 Year Old Rate: ￡4.62
- Apprentice Rate: ￡4.30
According to the LPC, the smaller pay increases for workers aged under 23 are due to “the risks to youth employment” posed by the current economic situation.
Budgeting for higher staff costs
While many will welcome the Chancellor’s announcement, there’s no doubt that the changes will come at a challenging time for UK businesses.
The extended Job Retention Scheme is set to close at the end of March 2021. That means employers bringing back minimum wage staff from furlough will need to update their payrolls to make sure workers still receive the correct wage. Some businesses may also find themselves in a difficult situation when it comes to rising staff costs.