Each year, the government reviews the national minimum wage rates and other employment-related rates. This year is no different.
Effective April 1, 2022, the National Minimum Wage (NMW) will increase as follows:
The increases of the two highest rates are much higher than those of previous years, being 6.6% and 9.8% respectively, and reduce the gap between the two rates. While Labor has lobbied for the NMW to be increased further than this, this latest increase shows a step towards delivering on the government’s promise to increase the NMW to £10.50 by 2024, and so that all employees over the age of 21 are eligible for this.
Although this increase will be larger than what we were accustomed to in previous years, the current “cost of living crisis” will significantly dampen the actual effect this change will have in real terms. With inflation already at 5.4% and fuel and utility prices expected to continue to rise, most employees who are paid at NMW will not see any benefit from this wage increase.
In addition, employees’ national insurance contributions are expected to increase, with the general employee contribution rate increasing from 12% to 13.25%, which will further limit the effect .
With the ongoing skills shortage in many industries, employers with large numbers of minimum wage employees will need to consider ways to ensure they attract and retain staff. If employers are unable to offer higher salaries, other employee engagement tactics will need to be considered.
In addition to the NMW increases, other labor law rates are being updated effective April, including:
- one week’s pay for the purpose of calculating statutory increases in severance pay from £544 to £571
- Statutory Maternity Benefit, Statutory Paternity Benefit, Statutory Adoption Benefit, Statutory Shared Parental Benefit and Statutory Parental Bereavement Benefit increase from £151.97 to £156.66
- statutory sick pay will increase from £96.35 to £99.35
- the maximum compensation for unfair dismissal is increased from £89,493 to £93,878 (or one year’s salary, if lower).