Changes to wages from April 2019

Posted by ianpascall - January 2, 2019 11:14 am Changes to Wages from April 2019

Important changes affecting wages from 1 April 2019

This might be the time of year when you are thinking about pay rises for your staff and/or budgeting for the coming year and, for the second year in succession, there are significant statutory increases in the pipeline.

In this regard you need to be aware of two changes, being an increase in the National Living Wage (NLW) and National Minimum Wage (NMW), and an increase in pension contributions.

From 1 April 2019 the following increases apply:

Employees over 25 (NLW)                            From £7.83 per hour to £8.21 (that’s 4.9%!)

Employees aged 21-24 (NMW)                    From £7.38 per hour to £7.70

Employees aged 18-20 (NMW)                    From £5.90 per hour to £6.15

Employees aged 16 and 17 (NMW)              From £4.20 per hour to £4.35

Apprentice NMW                                             From £3.70 per hour to £3.90

Above inflation increases

As you can see, the increase is quite a bit above the rate of inflation. Indeed, last year’s increase in the “adult rate” was also way above inflation at 4.4%.

Under pensions auto-enrolment the minimum total pension contribution is currently 5% of which the employer must pay at least 2%.  Most often the employer does pay the minimum of 2%, leaving the employee to pay the 3% balance. From 6 April 2019 the minimum total contribution increases to 8% with the employer paying a minimum of 3%, leaving the employee to pay 5%.

More pressure to follow?

To make matters even more challenging, the Living Wage Foundation believes that an employee needs £8.75 per hour to live and support their families and there will be pressure for the rate to get close to that by 2020/21. The slightly better news is that there are no plans, for the time being at least, for pension contributions to increase any further.

Therefore, once again, given the above NLW increases, the employer is effectively funding the employees’ extra pension contributions.

For labour intensive businesses this will be a real cost that has somehow to be absorbed or passed on to customers.

Please get back to us if you wish to discuss the implications of the above or require any assistance with either budgeting/costing or payroll processing.