It is unlikely that the Government will introduce measures to assist businesses in meeting rising costs, or costs which are already in place with regards to the National Living Wage (NLW) or other statutory wages. As the Government has stipulated that the Job Retention Scheme will be coming to an end in March 2021, it also cannot be said that this will be extended further to help businesses cope with this change.
It is advisable for your client to begin preparing for this even though it will not be enforced until April next year. They can do this by reviewing their employees’ contracts to determine who this change will apply to, as well as keeping this information in mind when hiring new staff.
Your client may already be aware that in his address to the House of Commons on 26 November, the Chancellor Rishi Sunak also announced that the National Minimum Wage (NMW) too will undergo major changes. Notably, the age threshold for those eligible for the NLW will be lowered to 23 instead of starting at age 25, meaning that those aged 23 and 24 will no longer receive NMW from April 2021 but will begin to receive NLW at the relevant rate.
To serve as a reminder, the following increases will apply from next year:
- NLW will increase from £8.72 to £8.91 (by 2.2%) for ages 23+
- NMW will increase from £8.20 to £8.36 (by 2%) for ages 21-22
- NMW will increase from £6.45 to £6.56 (by 1.7%) for ages 18-20
- NMW will increase from £4.55 to £4.62 (by 1.5%) for those under the age of 18
- The Apprenticeship Wage will also increase in April 2021 by 3.6% from £4.15 to £4.30
To reiterate, these increases are different to the usual annual changes and employers will need to budget for this in advance in order to be well prepared. As it will be compulsory for your client to pay these new rates to staff, they must now begin, if they believe that they may not be able to afford the costs, to think of ways they can reduce costs – possibly by agreeing reduced hours with staff where possible; or they could, always as a last resort, make some roles redundant.
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