In April 2020, the national living wage is set to increase by 6.2%, meaning any employers with staff on this rate will need to adjust their payroll systems accordingly and prepare to manage the extra cost.
According to research from the Federation of Small Businesses, small business owners’ most common response to the last minimum wage increase was to pay themselves less, with 71% saying they had lowered their profits or absorbed the costs.
Others increased their prices (45%), delayed investment (29%), or reduced staff working hours (23%).
The increases to the minimum wage aren’t looking likely to slow down over the next few years, as the Government works towards its target of bringing the national living wage to £10.50 by 2024.
However you’re planning to manage the cost, here’s what you need to know about the next increase that’s set to take place this April.
What are the new minimum wage rates?
Employers are required to pay workers a minimum amount per hour. This usually changes from 1 April each year, so you may need to review and update your payroll information ahead of time.
The current and new rates are as follows:
| Age of employee | 2019/20 | 2020/21 |
| 25 and over (national living wage) | £8.21 | £8.72 |
| 21 to 24 | £7.70 | £8.20 |
| 18 to 20 | £6.15 | £6.45 |
| Under-18 | £4.35 | £4.55 |
| Apprentice | £3.90 | £4.15 |
The apprentice rate applies where apprentices are aged under 19, or are in the first year of their apprenticeship.
Apprentices who are aged 19 or over and have completed the first year of their apprenticeship are entitled to the minimum wage for their age.
Who is entitled to the minimum wage?
Workers are entitled to the national minimum wage if they’re at least school leaving age. This can depend on which part of the UK you’re in, but is usually 16 in England.
People who are self-employed and run their own business are not entitled to it, and the same goes for company directors.
There are some other people who are not entitled to receive the minimum wage, including volunteers, people shadowing others at work, or people working through certain schemes.
Before offering work experience or internships, you may need to check whether you’ll be legally required to provide the national minimum wage.
What other payroll responsibilities do you have?
As an employer, there are several other responsibilities to keep in mind when you’re paying your staff.
When you run PAYE, you’ll need to ensure the correct tax and national insurance deductions are made from each person’s pay, and report this to HMRC in a full payment submission.
If you employ workers aged between 22 and state pension age, who earn at least £10,000 a year, you’ll be required to enrol them in an auto-enrolment pension schemes and set up contributions based on their qualifying earnings.
You also have certain statutory obligations as an employer, such as providing holiday pay, sick pay, and maternity or paternity pay. These may depend on the type of worker you employ and the hours they work.
You’re required to give your staff a payslip detailing the full amount they’ve been paid, any deductions, and their wages after those deductions, on or before their payday.
Talk to us for help running payroll in your business.