The UK government has announced that the National Living Wage (NLW) will increase by 6.7% from £11.44 to £12.21 per hour, effective from April 2025. This adjustment is expected to benefit over three million workers, providing an annual pay rise of approximately £1,400 for full-time employees.
Introduced back in 2016, the National Living Wage is calculated to enable workers over the age of 21 to afford essentials such as housing, food, healthcare, and transportation, while also allowing for savings and leisure. Since its introduction, the National Living Wage has made a significant difference to the living standards of millions of workers. Many have also reported improvements to their physical and mental health as well as their relationships with family members.
Whilst this brings with it abundant positives for employers, paying a National Living Wage can also present its challenges – particularly for SMEs. Increases to the NLW often puts additional pressure on business cashflow and in some cases can reduce overall profitability.
Negotiating these changes can be stressful, but ultimately it is important and, in your interests, to ensure that you do meet the National Living Wage requirements. Since its introduction, the government has had a policy in place which “names and shames” those businesses failing to meet their obligations with respect of the National Living Wage and the National Minimum Wage.
This policy has steadily been implemented more regularly and with greater force to deter businesses from underpayment. The onus is firmly on employers to ensure compliance with wage laws to avoid being publicly listed and fined.
During 2022-2023, HMRC closed nearly 3,200 cases and uncovered £13.66 million in unpaid wages affecting over 108,000 workers. Non-compliant employers were issued penalties totalling £13.72 million.
As we approach the next increase in April, it is crucial that employers take the time to review wages consistently and at regular intervals.
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