The National Minimum Wage (NMW) and the National Living Wage (NLW) are often seen as indicators of a healthy economy. Whilst the UK’s borrowing deficit continues to be high and a cost of living crisis in full swing, an increase to the NMW and NLW provide hopeful food for thought.
From 1st April 2023, The National Living Wage will rise to £10.42. This is a huge increase of 92p, equating to a 9.7% rise. A full-time worker on the National Living Wage, applying to people aged 23 and over, will receive approximately £150 more a month from April 2023. Younger workers qualify for the National Minimum Wage. This is rising by 9.7% for 16, 17, 18, 29 and 20-year-olds. Those aged 21 and 22 will get a 10.9% rise to push their rate closer to the National Living Wage.
We break down the new NMW and NLW rates and why the UK government have decided to increase them…
What Are The National Minimum Wage & National Living Wage Rates For 2023/24
Announced back in November 2022, the government confirmed a rise in the NLW and NMW rates. These rates will be applicable from 1st April 2023. The new NMW and NLW rates are as follows:
|Rate from April 2023||Rate As Of April 2022 to March 2023||Increase (%)|
|National Living Wage Rate||£10.42||£9.50||9.7|
|21-22 Year Old Rate||£10.18||£9.18||10.9|
|18-20 Year Old Rate||£7.49||£6.83||9.7|
|16-17 Year Old Rate||£5.28||£4.81||9.7|
If an employer runs a salary sacrifice scheme for childcare, it’s important to check that the amounts paid after the salary reduction still meet the NMW rate for the employees in the scheme.
If a company provides accommodation for workers, employers can charge rent. This deduction is permitted under the NMW rules but only if it not exceeding £9.10 per day (the permitted accommodation off-set) from 1st April 2023. Should the NMW rules be broken, HMRC may impose penalties of up to 200% of the amount of NMW underpaid up to £20,000 per worker.
It’s also worth mentioning employers need be careful not to make deductions which reduce workers’ wages below the relevant NMW rate. For example, if a company were to withhold money through the payroll for employee uniforms; staff meals; or subsidised childcare. This would be a breach of the NMW rules and will most likely result in a penalty fine or a criminal prosecution.
Why Have The UK Government Decided To Increase the National Living Wage & National Minimum Wage?
The increase in rates for the NLW and NMW are down to inflation reaching above 10%. The government sought The Low Pay Commission’s (LPC) recommendations. These ensure the NLW continues on track to reach the Government’s target of two-thirds of median earnings by 2024. The recommendations were unanimously agreed by Commissioners and accepted in full by the Government. Alongside the NLW, the Commission recommended significant increases in the National Minimum Wage (NMW) rates for younger workers.
The increases will support the wages and living standards of low-paid workers at a time when many are feeling increased pressure from a rising cost of living. They are recommended against a backdrop of a tight labour market where unemployment is at record lows and vacancies remain high as businesses compete to recruit and retain staff.
Katherine Chapman, Director of the Living Wage Foundation, believes, “The significant rise in the National Living Wage to £10.42 is welcome news for low-paid workers struggling with rising inflation. It’s encouraging that the government is taking steps to increase the pay on the lowest incomes as prices continue to rise. However, the rates remain lower than the real Living Wage – currently £10.90 in the UK and £11.95 in London – which is based on what it actually costs to live.”
We hope this has outlined the new rates for the National Living Wage and the National Minimum Wage for 2023/24. If you’d like to know any further information on anything mentioned, or anything accounting related for that matter, please do not hesitate to get in contact with us at Nordens, where one of our trusted advisors would be happy talking you through your query.