National Living Wage

News: National Living Wage Rise in April 2020

Victoria Scally Employees, News

Now the election is out of the way, we may well start to see a return to the ever changing tax policy landscape.

On the last day of 2019 we were given our first real post-election news that will impact small business.

The National Living Wage Increases from April 2020

From April, the national living wage for the over 25s will rise 6.2% to £8.72 per hour (from £8.21).

Pay rates will also rise across all other age groups:

  • 5% for 21-24-year-olds to £8.20
  • 9% to £6.45 for 18-20-year-olds
  • 6% to £4.55 for under-18s
  • 4% to £4.15 for apprentices

This represents a significant increase for employers.

What does this mean in real terms?

The issue with this isn’t just the minimums – if you have employees on a higher ‘band’, pay ‘grade’ or rate, maintaining the gap is important.

More responsibility, expertise or skills should equal more pay when compared to someone with less. Therefore the knock on effect of this change is far more impactful than just the % shown above.

In addition to this rise, employers will then often have a rise in Employers National Insurance and Pension contributions.

For an employee on the new £8.72 rate working 35 hours, this could cost in the employer an additional £1080 a year (circumstances dependant).

Couple this with an increase of 1.7% for businesses paying business rates, and it is looking like a costly 2020/21!

What should you do?

We would urge businesses to begin reviewing their pricing and margins to look at whether they need to move these in response.

For some industries, such as Care or Labour businesses these prices will need to move upwards. If you’d like to speak to us about your business situation, don’t hesitate to get in touch.