NMW and NLW Increase 2022: A Quick Read for Hirers

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NMW and NLW Increase 2022: A Quick Read for Hirers

Legislation & Regulation

National Minimum Wage and National Living Wage will be increasing this April, offering workers aged 16 and over a higher hourly wage. As a busy Hiring Manager, you’ll need a quick summary of the changes and how this could affect your business – this is the blog for you.

Matthew Dann: Thorn Baker Industrial Recruitment Director


NMW and NLW Increase and the Spring Statement

NMW and NLW

The new rate starts on 1 April 2022. The increase comes as part of the Government’s target of a national living wage set at two-thirds of median earnings by 2024.

In October 2021, the Low Pay Commission (LPC) put forward the recommended hike in wages following new data on the UK’s recovering economy.

The LPC report also found that the lowering of the NLW age from 25 to 23 went smoothly and that it should be further reduced to 21 by 2024.

Spring Statement

  • The income threshold for at which point people start paying National Insurance will rise to £12,570 in July, which Mr Sunak said was tax cut for employees worth over £330 a year

  • Mr Sunak pledged to cut basic rate of income tax from 20p to 19p in the pound before the end of this Parliament

  • The Employment Allowance, which gives relief to smaller businesses' National Insurance payments, will increase from £4,000 to £5,000 from April

How is National Insurance changing and what is the Health and Social Care Levy?

Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance (NI) from April 2022.

  • Employees pay NI on their wages

  • Employers also pay extra NI contributions for staff

  • The self-employed pay NI on their profits

But from April 2023, National Insurance will return to its current rate. Instead, the extra tax will be collected as a new Health and Social Care Levy.

Whilst 1.25p in the pound doesn’t sound too much it takes the employer's current rate of 13.8% up to 15.05%, an increase of 9%. When combined with the increase in NMW the cost of employing staff has never been higher.


NMW and NLW Increases in 2022

The Government has confirmed that:

The National Living Wage (for over 25-year-olds) will increase by 6.6% from £8.91 to £9.50.

The National Minimum Wage will rise across all age groups, including:

 


Rate from April 22

Current rate
(April 21 - March 22)


Increase

National Living Wage

£9.50

£8.91

6.6%

21-22 Year Old Rate

£9.18

£8.36

9.8%

18-20 Year Old Rate

£6.83

£6.56

4.1%

16-17 Year Old Rate

£4.81

£4.62

4.1%

Apprentice Rate

£4.81

£4.30

11.9%

Accommodation Offset

£8.70

£8.36

4.1%

April 1st Falls on a Friday – How Will That Work?

Thorn Baker Group's Payroll Manager Emma Craig has confirmed that it will be payable on the next ‘pay reference period’.

So if you run a weekly payroll (this will be most likely if you hire temporary workers) the NWM and NLW will apply as follows:

  • The pay reference period will start on the 4th of April

  • First payment where the worker receives their increased wage will be the 15th of April

The Recruitment and Employment Confederation's response to the Spring Statement

The Chancellor has given his spring statement today, setting out a number of measures including cutting fuel duty and confirming the increase in National Insurance is going ahead.

Responding to the statement, Neil Carberry, Chief Executive of the REC, said:

“Today’s spring statement comes after the announcement that inflation is at its highest for 30 years. There are also many tax rises coming into force next month, and the war in Ukraine is causing further uncertainty. Now is not the time to be raising National Insurance, the UK’s biggest business tax. Raising the threshold for employees is sensible and will help to soften the blow, but 60% of National Insurance is paid by businesses – this tax rise will place an extra heavy burden on them, especially in labour-intensive sectors like hospitality which are already struggling.

“The Chancellor’s cuts to fuel duty and business rates for retail, hospitality and leisure businesses are welcome. And his plan for incentivising business investment, including looking at the failed apprenticeship levy, sounds promising. But employers have been promised change before – this time, he has to deliver. It will require a real end to policy thinking being restricted to Whitehall. The recruitment industry is ready to come to the table and help government to ensure these new measures work.”

We're holding NMW & NLW consultations in your area free of charge! 

If you’d like to discuss further how these changes will apply to your current or future supply of temporary workers you can book an appointment withyour local branch right here.