It is that time of year, April – end of the financial year for many and also when the National Living Wage and National Minimum Wage increase. Details of the rises usually go out at least several weeks in advance, but companies do still get caught out, and it is crucial that you don’t! Whilst it may seem like a small detail that you can fix, failure to properly pay NMW can have severe consequences for your business.

Firstly, the rates:

What Are New National Minimum Wage Changes?

First thing to be aware of – previously the National Living Wage was for those aged 23 and over. From 1 April this year, anyone over the age of 21 will need to be paid this increased rate.

It is crucial that you apply this and not just out of habit apply the top rate to those aged 23 and over.

They are large increases this year, for someone aged 23 the increase from last year is £1.02 (the largest increase ever), and for those aged 21, it represents an increase of £1.26 as they jump up into the NLW category.

Now when you consider one employee and working one hour, an increase of one pound may not seem much, but for an employer paying across a workforce, the increase can be significant.

In the UK, 5.51million businesses employ between 0-49 employees. Let’s take a straight average of 25. 12.5% of all employees are on the minimum wage in that category.

If we take a business with a workforce of 49 employees, statistically 6 will be on the minimum wage. If those 6 employees work full time, for the employer the overall basic wage bill increases by £11,138.40, with the true cost to the employer being higher due to NI and pension.

That is not an insignificant cost to a small business that may not have started generating more revenue nor seen other costs reduce, simply because we have passed April 1.

However, the costs of not paying it can be catastrophic, whether it is intentional or not.

What Are the Consequences for Not Paying the Increased Minimum Wage?

You could end up with a HMRC investigation that can look at payments back 6 years, and you could be issued with a fine up to £20,000, with a minimum fine of £100 per employee. Compliance officers have the power to take information from your premises as part of their investigations, your business could be issued with a compliance notice and publicly named and shamed. You will also have to pay the arrears you owe to your workforce.

You could also be charged with a criminal offense.

As a result, even forgetting to update your payroll could have serious consequences for you, and our suggestion is always to prioritise the update to ensure that you won’t accidentally miss it.

Ways to insulate your business against the risk each year? Consider if your business can afford to lift your ‘minimum wage’ so that the increase doesn’t affect you as you are consistently paying above it.

Are You Ready to Become Your Workplace Hero?

Don’t let April catch you off guard! With the National Minimum Wage (NMW) and National Living Wage (NLW) on the rise, it’s crucial to stay informed and compliant. Act now to avoid penalties, investigations, and potential legal issues. Update your payroll and ensure all employees receive the correct rates. Remember, compliance isn’t just about avoiding fines; it’s about protecting your reputation and your workforce.

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