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National minimum wage increase: How employers can prepare

2024 sees the biggest ever cash increase to the minimum wage in the UK. This has many implications for working, which affects both employees and employers. In the case of the latter, certain considerations may have to be made from a business perspective. This post is designed to serve as your guide for preparing for the increase to the national minimum wage, as well as any future increases in employee costs.

What is the national minimum wage increase?

As of the 1^st of April 2024, the UK national minimum wage and national living wage is set to rise across the board. This includes:

Minimum wage for those aged 21 and over – increase of £1.02 to £11.44 (9.8%).
Rate for 18-20 year olds – increase of £1.11 to £8.60 (14.8%).
Rate for 16-17 year olds and apprentices – increase of £1.12 to £6.40 (21.2%).
Accommodation offset – increase of £0.89 to £9.99 (9.8%).

While these numbers might seem small on paper, they can translate to large salary increases depending on the number of hours an employee works during the average week. For example, a 27-year-old worker that works 38 hours a week will see a yearly wage increase of £2017.81. This helps put into perspective how much the changes to the national minimum wage can impact employers, especially when it comes to larger workforces.

Are employers required to pay the minimum wage?

Yes. In the UK, the national minimum wage is a legally mandated rate that is the minimum amount that must be paid to all workers of a certain age. Although minimum wage positions are often thought to be most common in certain sectors such as hospitality and retail, all businesses are required to follow the regulations. Failure to comply can result in HMRC issuing fines to employers, with the latter having their reputation tarnished as a result. Get quality employment law help for employers to prevent this outcome.

HR advice for employers to prepare for NMW increases

Navigating wage increases, especially ones such as this that are likely to impact almost everyone within your organisation can be tricky. The main effect is that employers need to find a way to compensate for the increased cost of employees as a result of higher wages. This could mean raising prices on products and services, cutting operation costs, or reducing the size of the workforce. In either case, employers need to be prepared in advance of the date of the increase. This likely means close coordination between accounting and HR. However, the exact effect of the national minimum wage increase can affect businesses differently depending on their function.

Employers might stop or delay hiring new workers, which could directly impact recruiters’ margins and profitability. On the other hand, this could improve the quality of candidates that recruiters offer as these candidates are now easier to attract.

An option for agencies to offset a rise in wage rates is to pass on the increase to their regular services. While this might result in uncomfortable conversations with existing clients, it will allow the employer to absorb the costs of wage increases and meet the legal requirements. We provide professional contract law services to help businesses make updates to employment contracts.

If you’re an employer that frequently uses contractors, be aware that they will also see an increase in their wages. This could mean increase in Income Tax or National Insurance contributions. It will either be up to the company or the umbrella organisation to inform workers of what will change on their payslip.

Experienced employment lawyers for HR support

At Employment Law Services Ltd (ELS), we get to know your business before providing any recommendations. This way, we guarantee that our legal advice is in the best interest of your organisation. With us by your side as an employer, you’ll be able to adapt when laws and regulations change. Get in touch to start the conversation on how we can help.