31st January 2020

National Minimum Wage Increase for 2020

In anticipation of the new financial year starting in April, the Government has recently announced its annual increase to the wages of millions of the lowest paid workers in the country.

From 1 April 2020, there will be an increase to the National Minimum Wage across all age groups, and the new rates will be as follows:

25 year olds and over:    From £8.21 to £8.72 per hour

21-24 year olds:                From £7.70 to £8.20 per hour

18-20 year olds:                From £6.15 to £6.45 per hour

Under 18s:                          From £4.35 to £4.55 per hour

Apprentices:                      From £3.90 to £4.15 per hour

Employees aged over 25 receiving the National Living Wage will benefit from a 6.2% pay rise, equating to £930 per year for somebody working full time.

Businesses in the manufacturing, retail and care industry are likely to be hit hardest hit by these increases. The British Independent Retailers Association has been among organisations voicing concerns, warning that these industries are facing a particularly tough trading environment with costs rising rapidly, and it is likely that such businesses would look to employ fewer people as a result of the minimum wage rising. It cannot be denied that businesses value their employees and believe in paying a fair wage. However, the increase in the minimum wage means that employers will likely need more help with reduced national insurance or some other form of incentive to encourage recruitment.

Many businesses have chosen to follow the recommendations of the Living Wage Foundation and pay a minimum of £9.30 per hour across the UK and £10.75 per hour in London.

Previous minimum wage increases have resulted in employers finding ways to reduce their overall payroll cost by reducing rates of overtime pay, reducing or removing overtime, removing paid breaks for their employees, and removing any enhanced company sick pay, as well as putting a freeze on recruitment. Employers who are intending to make changes to employee terms and conditions should ensure that they consult sufficiently with their employees about any such changes. If consultation does not take place before changes like these are implemented, this would likely lead to claims for a breach of contract.

Employers may also find that they are in a position where they are increasing the rates of pay for staff on the minimum wage, and this might mean they are paid as much, or almost as much, as their supervisors. Employees may therefore be expecting pay rises across all levels in order to maintain the separation between employees at different levels of seniority.

*All information is correct at the time of publishing

Napthens LLP

Employment Law Specialists

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