The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2016.
- the rate for 21 to 24 year olds will increase by 25 pence to £6.95 per hour
- the rate for 18 to 20 year olds will increase by 25 pence to £5.55 per hour
- the rate for 16 to 17 year olds will increase by 13 pence to £4.00 per hour
- the apprentice rate will increase by 10 pence to £3.40 per hour.
The mandatory National Living Wage (NLW) applies for workers aged 25 and above. This is £7.20 an hour.
NLW and NMW rates will in the future be uprated every April starting in April 2017.
Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC may ‘name and shame’ non-compliant employers.
National Living Wage hits small business costs
According to research, 47% of small business owners blame increased wages following the introduction of the NLW as the main contributor to rising costs.
The research, carried out by the Federation of Small Businesses (FSB), revealed that a third of FSB members claim that the NLW has led to a small increase in their wage costs while one in five have said that their staff costs have increased significantly. Although 59% of FSB members absorbed the increased costs through reduced profitability, 35% have increased prices, 24% reduced staff hours and 23% cut investment.
HMRC have updated their guidance on payroll reporting including what employers should include on the Full Payment Submission (FPS) and Employer Payment Summary (EPS) returns.
Please contact us if you would like help with your payroll.
Internet links: ACAS article FSB press release Payroll guidance
With two Budgets in 2015 it does not feel like that long ago since we last had a Budget but the next one is not that far away and will take place on Wednesday 16 March 2016. Ahead of the Budget the CBI have written to the Chancellor outlining what they would like to see in the Budget proposals.
The CBI emphasise that businesses have suffered sizeable policy costs which impact on their ability to remain competitive. These include the Apprenticeship Levy, the National Living Wage and also pension auto enrolment. They therefore want the government to provide additional tax incentives to promote productivity and the delivery of jobs. Examples would include:
- new capital allowances for investments in structures and buildings
- allowing smaller companies claiming research and development tax credits to be able to claim repayments in part payments throughout the year rather than yearly
- introducing a payroll incentive to help small firms with the costs of hiring high-skilled staff along the lines of the Employment Allowance.
We will keep you informed of pertinent Budget announcements.
Internet link: CBI
The government has announced the introduction of a new National Living Wage (NLW) for working people aged 25 years and above.
The NLW is effectively another higher age band of the National Minimum Wage (NMW). Initially the NLW is set at 70p above the current NMW, although this will fall to 50p when the NMW increase comes into effect in October 2015. Further increases are to be recommended by the Low Pay Commission in order to achieve the government’s objective of reaching 60% of median earnings by 2020. This means that NLW increases will be independent of the NWM wage increases for each age band that are made annual in October.
The impact on small businesses
Ian Bryan, Head of Business Services, said: “The additional funding needed to cope with increases in wages with the introduction of the National Living Wage is likely to preoccupy many small business owners, particularly in conjunction with the recent onset of Auto Enrolment.”
“The impact of the National Living Wage will vary significantly across different sectors, with small shops, hospitality firms, retailers and care providers, in particular, facing real challenges in affording the additional expenditure. It is therefore vital that, in a time of increasing costs and pressures to maintain margins, that you seek sound and proactive financial advice.”
For more information on how Hawsons can help, please contact Ian Brian at firstname.lastname@example.org or visit our Business Services page.