In order to make sure these pay rises are incorporated effectively into the business budget, all businesses should be aware of the changes that will come into force in April 2023.
This year, inflation has raised them higher than usual. SMEs are already under significant pressure, so this isn’t good news for them. It is important to consider where this extra cost will be absorbed – either by the customer or by impacting profit margins.
Here is a handy summary of the main statutory rates, effective April 1.
National living/minimum wage
There are several components to the national living wage, as you probably already know. According to the Low Pay Commission, by 2024, the national living wage should be two-thirds of all workers’ median earnings.
As a result of Covid’s interference, rates were raised in 2018 more than normal (6.6%) to catch up with inflation in 2022. They recommended a 10% increase this year.
As a result, the new rates will begin on April 1, 2023:
Aged 23 and older (the national living wage): £10.42 per hour
Aged 21-22: £10.18 per hour
Aged 18-20: £7.49 per hour
Aged under 18 (but above compulsory school leaving age): £5.28 per hour
It’s important to understand that pay deductions (like for a mandatory dress code for waiting staff) can drag the effective rate below the legal minimum if you pay the national living wage or close to it.
Many businesses get caught out by this, and HMRC can impose sanctions and conduct a lengthy investigation. Consult an expert to ensure your employment practices are compliant and help you review them.
The minimum wage for apprenticeships is also set at a certain level. There is a significant difference between these and the headline minimum wage rates. Starting April 1, these rates will increase to:
Apprentices aged under 19: £5.28 per hour
First year apprentices aged 19 and over: £5.28 per hour
Aged 19 or over and have completed their first year: an applicable living/minimum wage for their age (see above).
The government pays for most of the training, which makes apprenticeships a cost-effective and interesting way to hire new talent. It’s important to remember that apprenticeships aren’t just for tradespeople.
Some professional services firms, such as accounting firms, actively recruit youngsters out of college with the offer of training and rapid career development. It’s an enticing prospect for young college graduates or school leavers who are facing college debt but have an alternative route to employment. Consider also hiring those with the maturity to consider the holistic practicalities of the next decade. This option can also be advised by experts.
Statutory maternity/paternity/adoption pay
Businesses face similar challenges when it comes to statutory maternity, paternity, adoption, and shared parental leave benefits. Maternity and adoption pay are calculated as a percentage of average weekly earnings during the first six weeks. The percentage remains at 90%.
Maternity, paternity, adoption, and shared parental leaves are paid at £172.48 per week or 90% of the employee’s weekly average earnings (whichever is lower). The rate was £156.66 per week in 2022.
Statutory sick pay
The final statutory rate we will discuss in this article is sick pay. When an employee misses four consecutive days because of sickness, it becomes payable. The weekly rate will increase to £109.40 on April 6. In April 2022, this amount was £99.35.
Inflation is still high, and costs of everyday staples such as food continue to rise, making it a difficult time for employees and business owners alike. To ensure the well-being of all employees, company owners should carefully consider these statutory price increases.
It is important to seek advice on how to manage and motivate your workforce as a result of these pay increases. In spite of ongoing economic difficulties, it is important to recognize the value of your existing workforce’s experience and expertise. In preparation for easier times, you should do all you can to preserve this knowledge. You will be able to retain more of your workforce as a result of doing this.
In order for an adviser to be effective, he or she must have an in-depth understanding of the business and its values. That’s why we’d always recommend a personal service over an off-the-shelf product.
Additionally, you should keep in mind the risk of tribunals, fines, and legal fees. A comprehensive insurance policy is worth its weight in gold, if only to provide peace of mind while navigating choppy waters.