Autumn Statement: NMW increased hourly rates announced

From 1 April 2024, the National Living Wage (NLW) is increasing to £11.44 per hour for workers aged 21 and over. Reducing the age threshold for NLW from 23 to 21 years old means that workers aged 21-22 years old currently paid at National Minimum Wage (NMW) will see a 12 percent increase in pay.

In addition to the increase in NLW for individuals aged 21 and over, the NMW will increase to £8.60 for 18-20 year olds, £6.40 for 16-17 year olds and £6.40 for apprentices. The accommodation offset will increase to £9.99.

For employers, the increase in NLW from April 2024 will represent an increase in staff costs in the region of £1.2 million for every 500 workers currently paid at the prevailing rate (including employers’ National Insurance Contributions, Apprenticeship Levy, and pension contributions).

Employers in high-risk sectors for NMW purposes (e.g. retail, hospitality, and manufacturing) may find that salaried workers who previously fell outside the remit of a HMRC review due to their level of pay are now caught when HMRC are identifying ‘at risk’ workers for NMW purposes. As outlined in our earlier article, HMRC have launched a repeat visit programme to reassess NMW compliance for selected businesses who were previously subject to an investigation. 

Employers in sectors that were previously considered to be low risk for NMW purposes (e.g. professional services, public sector organisations, banks etc.) may also find themselves at increased risk of being non-compliant due to technicalities within the salaried worker rules such as time off in lieu (TOIL) falling outside of the calculation year, and some pay and allowances not counting towards pay for NMW. 

More employees may be paid at or near to the NMW/NLW rates from April 2024. Prior to this, employers should review their NMW compliance to ensure that risks are not arising due to complexities in the legislation. This might include reviewing:

• Job roles and employees’ terms and conditions to check that the correct pay elements and deductions (e.g. salary sacrifice arrangements) are being considered in the calculations of pay for NMW purposes;
• Time records for salaried workers to identify those who may be working more than their basic hours and are at risk of falling below NMW/NLW; and
• Time Off In Lieu (TOIL) policies and records to avoid breaches caused by the salaried worker and TOIL calculation years being misaligned.

Employers should also be considering the impact of these increases on their overall remuneration strategy. As the rates increase for the lowest paid workers in an organisation, the differential between pay bandings, may reduce. It will be important for employers to consider how they maintain a compelling reward package for employees at all levels of pay.

To talk through how we can assist with your NMW compliance or remuneration strategy, please contact the authors or your usual contact at KPMG in the UK. Our team of employment tax, legal, payroll and reward consulting experts can provide support on all aspects of NMW risk assessments, compliance, and remediation, as well as employee benefits and remuneration. 

For further information please contact:

• Caroline Laffey
• Josiah Greenall