What does a statutory salary increase mean for small businesses?
April certainly brings a shower, but it also brings a legal raise. All businesses should be aware of the upcoming changes and, ideally, plan ahead so they can effectively incorporate these pay increases into their business spending.
This year, thanks to inflation, it will jump higher than usual. For small businesses, which are already under considerable pressure, this is not good news. You need to consider where these extra costs will be absorbed (passed on to customers or impacted on margins).
Below is a handy overview of the main statutory tax rates to help you plan and budget for the impending price increases that take effect from 1 April.
National life and minimum wage
As you know, the National Living Wage has several components. The Low Wage Commission (the body that advises the government on rates) has set a target of two-thirds of the average income of all workers over the age of 21 to be a living wage nationwide by 2024. You may not know that.
This target has been thwarted by Covid, and even before inflationary pressures kicked in in 2022, they had recommended a higher-than-usual rate hike last year (6.6%) to catch up. It was around 10%.
So, from April 1, 2023, the new prices are:
Over 23 (National Living Wage): £10.42 per hour
21-22 years old: £10.18 per hour
18-20 years old: £7.49 per hour
Under the age of 18 (but above the age at which compulsory education ends): £5.28 per hour
When paying the National Living Wage or something close to it, be aware that processes such as clock-in/check-out and payroll deductions (e.g. mandatory dress codes for wait staff) may drive the effective rate below the legal minimum. is important.
This could catch many companies and lead to lengthy investigations and sanctions from HMRC. That way, our experts can review your employment practices to help ensure you remain compliant.
There is also a minimum wage rate for apprentices. These start out significantly lower than the headline minimum wage rate. From 1st April, these starting rates will rise from £4.81 per hour to:
Apprentices under the age of 19: £5.28 per hour
First year apprentices aged 19+: £5.28 per hour
For those aged 19 and over who have completed the first year: Living/minimum wage according to age (see above).
Since much of the training is government-funded, apprenticeships are a cost-effective and interesting way to bring new talent to the team. It’s important to remember that an apprenticeship is not just a job protection.
Some companies in the professional services sector, such as accounting, are actively recruiting college graduates and providing training and rapid career development to integrate them into the workforce. For young college or school dropouts who face the prospect of student loans but have a different route to work, this is an attractive prospect. It can also be regarded as a young man who wants to recruit mature talent, considering the overall practicality of her next decade. Again, experts can offer advice on this option.
Legal maternity/childcare/adoption allowance
Companies face similar problems with sharing statutory maternity benefits, statutory paternity benefits, adoptions and parental leave benefits. Of course, his salary for the first six weeks of birth and adoption is calculated as a percentage of the average weekly earnings. It remains at 90%.
Thereafter, maternity, paternity, adoption and shared parental leave are all paid at a rate of £172.48 per week or 90% of the employee’s average weekly earnings (whichever is lower). The price for 2022 was £156.66 per week.
statutory sickness allowance
Statutory sick pay is the last of the main statutory rates considered here. Eligible employees are paid after four consecutive days of sickness absence. The weekly rate from April 6th is £109.40 for him. This compares to his £99.35 in April 2022.
Advice for small businesses
With inflation still high and the cost of daily necessities such as food continually rising, it’s a difficult time for employees as well as business owners. It is important to ensure that these legal price increases are carefully considered by company owners.
I encourage you to seek advice on what these raises mean and, more importantly, how to continue to structure and motivate your employees. While ongoing financial difficulties are of course a challenge, it is important to recognize the value of the experience and expertise of existing employees. It makes good business sense to do all we can to preserve this knowledge for easier times. Employees will also appreciate you and are more likely to remain loyal as a result.
It is important for advisors to have a deep understanding of you and your business. It’s about understanding what that value is and where it’s headed. That’s why we always advocate personal service over off-the-shelf solutions.
Also keep in mind the legal risks and resulting fines and attorney fees. Good insurance is more valuable than anything else to give you peace of mind and allow you to focus on navigating your ship in choppy waters.
Sue Tumelty Human Resources Department.
How to manage employee raise requests