National Living Wage increase confirmed in Autumn Budget

In the Autumn Budget announcement, the Chancellor confirmed that the National Living Wage will increase in April 2022. Coodes Solicitors’ Employment team explains what it means.

The Chancellor Rishi Sunak has today (27 October) announced an increase to the National Living Wage. From 1 April 2022, the Living Wage will rise from £8.91 to £9.50 an hour for workers aged 23 and over. For younger people aged 21 and 22, the National Minimum Wage will increase from £8.36 to £9.13 an hour. The Chancellor also confirmed that the Apprentice Rate will rise from £4.30 to £4.81 an hour.

What is the National Living Wage?

The National Living Wage was launched in 2015 and sets the mandatory minimum that UK employers must pay workers aged 23 and over. Younger workers and apprentices qualify for the National Minimum Wage or Apprentice Rate.

Employers can be penalised by HMRC and taken to court if they fail to pay workers the National Living Wage.

Why has it been increased?

Many media outlets have attributed the increase to the Government’s response to the impact of Covid on young people but this is only part of the story. In fact, the Government had already made a long-term commitment to increase the National Living Wage to eventually be in line with two-thirds of median earnings.

The Chancellor announced a 2.2% rise to the Living Wage in the 2020 Autumn Budget, which resulted in it increasing from £8.72 to £8.91 in April 2021. It was then also extended to workers under the age of 25.

It should therefore come as no surprise that another increase has been announced. However, at 6.6% this is a more significant rise than we may have expected. The Government has acknowledged the serious impact of Covid-19 on those on low incomes, and on young people in particular. This increase reflects the Low Pay Commission’s recommendations and should provide some compensation to those worst hit financially by the pandemic.

Critics say it does not go far enough in reflecting true living costs. The Living Wage Foundation encourages employers to instead pay what it calls the ‘real Living Wage’.

What does the rise mean for employers?

Employers must ensure they start to pay the new National Living Wage and National Minimum Wage from 1 April 2022. This will include:

• Identifying which employees qualify for the National Living Wage and which should be paid the National Minimum Wage.
• Ensuring you understand the new rates of pay.
• Implementing the necessary updates to your payroll system.
• Communicating the new rates of pay to your staff.

Our Employment team provide support to businesses helping them keep ahead of recent changes in Employment Law. If you need some friendly advice, call Steph Marsh on 01579 324 017 or send her an email.