Every year in April, the UK observes an increase in National Minimum Wages (NMW), National Insurance Contributions (NICs), and statutory pay rates as recommended by the Low Pay Commission (LPC). The bill is shared with the public as soon as the government fully accepts the increased percentages.
According to the LPC reports published in 2021 October, an increase of specific percentages in wages will be implemented, adding 82p to hourly pay from 2022 April onwards. With this NMW, all individuals of age 23 will be making an annual salary worth £20,995.
Reasons for NMW Rising
The salaries are increased annually under the supervision of the LPC, which makes decisions based on key findings of the current status of the UK’s economy. In 2022, the inflation may surge up to 7%, making the addition of roughly £700 to annual utilities (gas, petrol, food, electricity) expenses. Office for National Statistics (ONS) has evidence showing that even after making the expected increase in the wages of UK workers, the concerns of inflation and crisis will sustain as we will still be lagging to keep up with the rising prices.
Another reason for NMW rising is to achieve the defined target by 2024, which is “setting an NLW at two-thirds of median earnings.” Moreover, the Low Pay Commission is planning to lower the National Minimum Wage (NMW) age to 21 by 2024 and to eliminate the possible risks or complications; they are practicing the NMW rising this year to the age of 23.
- Workers 16 to 17 years of age have a wage raise of 4.1%, making it £4.81 an hour
- Workers 18 to 19 years of age have a wage raise of 4.1%, making it £6.83 an hour
- Workers 21 to 22 years of age have a wage raise of 9.8%, making it £9.18 an hour
- Workers 23 years of age and more have a wage raise of 6.6%, making it £9.50 an hour
- The rise in apprentice rate will be 11.9%, making it £4.30 an hour
- The rise in Accommodation Offset will be 4.1%, making it £8.70 an hour
Apart from NMW, the below-mentioned rates will also upsurge:
1. Universal Credit with extra earnings threshold for Universal Credit
2. State pension, pension for part-time employees, or other benefits
3. Council tax (the amount varies on the region you live in. The estimated rise is £400 per household on average.)
National Insurance Contributions (NICs)
A yearly hike in NMW is absolutely a favorable decision, but thinking about the rise in the National Insurance rate, increased wages no longer benefit you. NMW and NICs are given raises at the same time of the year, and for 2022, employers and employees can expect an increase of 1.25%. This amount is used as your extra funding to avail medical/healthcare and social care services.
From 6 April 2022, individuals with an annual salary of £25,000 will be paying an extra £193 every year to the government. Whereas, workers with a £50,000 salary will be obliged to pay approx. £505 more for insurance.
Statutory Sick Pay (SSP)
The SSP will see a raise from £96.35/week to £99.35/week.
The weekly rates for Statutory Maternity, Paternity, Adoption, Parental Bereavement, and Shared Parental Pay will increase from £151.97 per week to £156.66 per week. It will be exercised from 3 April 2022.
Effects of NMW Raise on Business
An increase in NMW rate and steep growth in NICs directly affects SMEs and even large enterprises as they will face problems in keeping the balance between hiring well-trained staff and operational finances. Why? Because now you must be paying more for recruiting a skilled employee.
To save money, they will be left with the choice of hiring fewer staff of younger age and lesser experience, limiting working hours, or ultimately shifting to part-time/contract-based staff. Employers might prefer spending time and putting effort to train unskilled young workers instead of paying higher costs to older employees. But, operating with untrained workers with limited knowledge and hands-on experience can be disastrous.
What Do You Need to Do?
To keep your business safe from the financial disruption caused due to rise in NLW and NICs, start hiring staff remotely.
Hiring remote workers will provide you with wide-ranging professional benefits; for instance, considerable savings with reduced overhead costs, including insurance and LPC will have no impact on remote staff’s wage rates. It means you will be paying less to your remote staff than the average UK wage rate without compromising work quality or will keep paying the same salary despite the increase in NLW.
Get Your Work Done Remotely with Winnors
With Winnors, you can avoid breaching NMW legislation without worrying about inflated business overheads, increasing NMW rates, and NICs costs because we support SMEs to hire efficient and talented staff remotely with the same cultural, ethical, language, and professional preferences to remove communication barriers and gaps. The increased wage can eat away your profit, but we can save you money. So, if you cannot afford to pay National Living Wage because of the tight budget, let us help you improve your bottom line by hiring remote staff.