One of the significant changes to be announced in the Chancellor's 2023 Autumn Statement was the increase in the minimum wage levels employers are legally required to pay. These changes, which come into effect in 2024, could have a huge impact on businesses in Kidderminster, Redditch and across Worcestershire.
The UK has long been committed to ensuring fair wages for its workforce since the national minimum wage (NMW) was introduced in 1998. Another term that has gained prominence in recent years is the National Living Wage (NLW). In this blog, we will highlight the distinctions between the NMW and NLW, explore the groups to whom these regulations apply, and assess the potential impact of minimum wage increases on businesses' payrolls in the UK.
The NMW and the NLW are statutory minimum hourly wage rates set by the UK government, but they differ in scope and the demographics they aim to support.
The NMW currently encompasses five rates, each applicable to distinct age groups and apprentices. As of April 2023, and for this current tax year, the NMW rates are:
| Age Group | Minimum Hourly Rate |
| 23 years and over | £10.42 |
| 21 -22 years | £10.18 |
| 18 -20 years | £7.49 |
| Under 18 years | £5.28 |
| Apprentice | £5.28 |
The NLW currently only applies to employees aged 23 years and over, with the rate the same as the NMW for that age group, i.e. £10.42 per hour. The NLW ensures employees aged 23 or over receive a wage covering the basic cost of living. The NLW is essentially a higher rate of the NMW for this age group, and it is adjusted annually. The NMW and NLW aim to combat low pay and promote economic fairness.
However, later in this blog, we provide details on how the NLW and NMW rates will change in 2024.
The NMW and NLW apply to almost all workers in the UK. This includes full-time, part-time, and temporary employees, agency workers and apprentices, providing they are of school leaving age or above. Employers need to stay informed about changes to these rates and ensure compliance, as failure to do so can result in penalties and possibly legal consequences.
In his Autumn Statement, the Chancellor, Jeremy Hunt, announced two major changes.
The first was that the NLW would increase to £11.44 per hour, nearly 10% higher than the current rate. The second was that the age threshold from which NLW is applicable will be reduced from 23 years to 21 years old.
A breakdown of both the new NLW and NMW rates are:
| Age Group | Minimum Hourly Rate |
| 21 years and over | £11.44 |
| 18 -20 years | £8.60 |
| Under 18 years | £6.40 |
| Apprentice | £6.40 |
As a reminder, the rates quoted are the minimum that UK employers are legally bound to pay their staff. Employers can pay their employees more than the above rates, with many businesses doing so, to attract good quality recruits.
The above changes will come into force on 1 April 2024.
The increase to NMW and NLW will be viewed positively by employees who are paid based on this hourly basis. However, the increases could profoundly impact businesses in Kidderminster and Redditch, notably smaller enterprises and those operating in sectors with traditionally lower profit margins. While raising the minimum wage is to improve workers' living standards, businesses may face challenges in adjusting to higher labour costs.
For small businesses, increasing wage expenses can strain already tight budgets. This may lead to tough decisions, such as reducing working hours, cutting benefits, or even laying off staff to offset the additional costs. However, advocates argue that paying fair wages can boost employee morale, productivity, and retention, ultimately benefiting businesses in the long run.
In sectors with historically low wages, such as hospitality and retail, businesses may need to reassess their pricing structures to accommodate higher labour costs. This could lead to inflationary pressures, impacting customers and contributing to a broader economic ripple effect.
The Federation of Small Business (FSB) has said it will lobby the government to make the NLW more affordable to small businesses in the spring budget. The FSB's summary of the Autumn Statement and its effect on smaller businesses can be found here.
The National Minimum Wage and National Living Wage are critical components of the UK's efforts to ensure fair pay for all workers, not just those in the local area. While these regulations aim to uplift employees, businesses must navigate the challenges of increased labour costs. Striking a balance between supporting workers and maintaining the viability of businesses is an ongoing challenge, but it is essential for fostering a sustainable and equitable economy. As the landscape of work and wages continues to evolve, ongoing dialogue and collaboration between policymakers, businesses, and workers will be crucial to achieving a harmonious and prosperous society.
If you are concerned about how to process the changes in the NMW and NLW when running your payroll, we can manage this for you. Our payroll service can calculate what effect the changes will have on your costs and process all employee payrolls accurately and as frequently as you require.
To book a free consultation, please call us on 01905 796512 or email info@jrma.co.uk.
