In his 2023 Autumn Statement, the Chancellor announced that the national living wage would increase from the current hourly rate of £10.42, to £11.44 in April 2024. This is a significant jump and for those already on the national living wage it represents an increase of 9.8% on their hourly rate of pay.
It is important to look at this increase in a wider economic context as according to the website Statista, wages in the UK grew by around 6.2% in December 2023 and when inflation is factored in, the real terms increase is only 1.8% so the national living wage change is outstripping average wage growth by some margin. This increase is likely to cause concerns for many employers in an already difficult operating environment with increasing costs for rent, utilities and supplies already putting their businesses under financial pressure.
In a further change, the government has accepted the recommendation of the Low Pay Commission and has lowered the qualify age for receiving the national living wage. Currently only workers aged 23 and over qualify for the top hourly rate but from April 2024 that age bracket will widen and will include workers aged 21 and over. The current national minimum wage rate for workers aged 21 and 22 is £10.18 and so their increase from April 2024 will stand at a whopping 12.4%. Employers need to be aware of this change in the age brackets and ensure that they make the necessary uplifts for employees who will be in scope from April.
The increases don’t stop there either with younger workers receiving major percentage rises in their hourly rates as follows:
| Category | Current Hourly Rate | Hourly Rate From April 2024 | Monetary Increase Per Hour | Percentage Increase |
| 21 and over | £10.42 | 11.44 | £1.02 | 9.8% |
| 18-20 year olds | £7.49 | £8.60 | £1.11 | 14.8% |
| 16-17 year olds | £5.28 | £6.40 | £1.12 | 21.2% |
| Apprentice rate | £5.28 | £6.40 | £1.12 | 21.2% |
Although the new rates don’t take effect until 1 April 2024 it is important to prepare for these changes. The increases will clearly impact on your staffing costs and so planning ahead and looking at your staffing budget is crucial.
Some businesses track their rates of pay at a certain amount or percentage above the minimum rates but with the large-scale increases this may no longer be feasible and they may need to re-evaluate their approach and inform staff accordingly. This jump may also mean that some staff who are currently paid slightly above the minimum rates will have an hourly rate that actually drops them below the minimum rate come April. For example, if an employee who is 19 currently receives £8 per hour, then their employer will need to decide if they are going to maintain that differential and uplift the rate to more than the minimum or just increase the hourly rate to match the new minimum of £8.60.
Whilst these increases may place a financial strain on your business, employees are legally entitled to be paid the minimum rate for their age. If you fail to pay staff what they are entitled to you could end up with grievances from unhappy staff as they try to resolve the issue with you internally. If employees are particularly disgruntled they could take matters further and make tribunal claims or report the company to HMRC. HMRC have the power to make businesses pay any minimum wage shortfalls going back as far as 6 years so that staff receive what they are owed. HMRC can also impose significant fines and name and shame businesses on a publicly available list of employers who have not paid staff the minimum wage which would have a huge reputational impact on any company. The most recent list was published on 20 February 2024 and included household names such as Estee Lauder Cosmetics, Easyjet, Greggs and River Island.
It’s vital to plan and make preparations for these changes, if you need any help or guidance then please get in touch with one of the CUBE HR team.
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