The government have announced that the National Living Wage and National Minimum Wage rates are set to increase on 1 April 2020.
All employees aged between school leaving age (16) and 25 who are currently on national minimum wage rates will have an increase to their hourly rate. This is good news for the employees but can be difficult for the employer due to increased costs.
The table below shows the percentage increases in gross pay for different age brackets, assuming the employee works 40 hours a week.
Of course, the cost for the employer does not stop with just the gross pay. There would also be the employer's part of National Insurance and pension contributions.
The extra cost for employers at the current rates of NI and minimum contributions for pensions would be:
“Apprentice”, “Under 18” and “18-20” categories do not qualify for auto enrolment pensions. There is a 0% rate for employer's national insurance for all employees under 21 and apprentices under 25.
As can be seen from the table above, the additional costs to the employer for those workers aged 21 and over and not on an apprenticeship contract, is in excess of £100/month.
These increases will prove challenging to many businesses, particularly those who employ a high number of young people in sectors such as leisure and catering, causing many to undertake a full review of their staffing requirements.
If you would like more information on how these changes will impact upon your business the please contact us.