National Wage Increase

Written by: Annie Zygmunt

- National Minimum and Living Wage Increasing
Introduction:

1st April 2022 is bringing an increase in the National Wages, as officially announced by Chancellor Rishi Sunak on October 27th, 2021.

The National Minimum Wage, as well as the National Living Wage increase varies from 19p to 82p depending on the age group. This means an increase in the minimum pay for everyone aged 16 and above.

What are the National Minimum and National Living Wage?

The Minimum Wage legislation has been introduced by most countries before the end of the 20th century. It is legally the lowest amount per hour that employers can pay their employees. The employers may choose to pay more than this, but legally they are not allowed to pay a worker less than the government stated minimum wage for their age.

National Minimum Wage is for those aged 16 and above, while the National Minimum Wage is aimed at those who are 23 and older.

National Living Wage is usually higher than National Minimum Wage, and tends to factor in the cost of living.

What is the financial difference?

The rates of the wages change on the 1st April every year.

For example in 2019, an employee working 40 hours a week, making £7.83 an hour would earn £1,252.80 in March (before tax and other deductions). That amount would then increase by 4.9% to £1,313.60 in April, on a wage of £8.21 an hour. That makes a £60.80 difference.

 

April 2018

April 2019

Increase in %

Apprentice

£3.70

£3.90

5.3%

16-17

£4.20

£4.35

3.5%

18-20

£5.90

£6.15

4.2%

21-24

£7.38

£7.70

4.2%

National Living Wage

£7.83

£8.21

4.8%


The increase difference in 2022 ranges between 4.1% and 11.9% depending on the age bracket.

April 2021

April 2022

Increase in %

Apprentice

£4.30

£4.81

11.9%

16-17

£4.62

£4.81

4.1%

18-20

£6.56

£6.83

4.1%

21-22

£8.36

£9.18

9.8%

23 and over (NLW)

£8.91

£9.50

6.6%


The difference between April 2019 and April 2022 can be seen below in the form of percentages:

There was also a major difference caused by the government decreasing the National Living Wage from being 25 years old and above in 2019, down to being 23 years old and above in 2022. This year was the first time where 23 year old people are being captioned under the National Living Wage.

Why is there an increase?

The government are providing a well-earned rise in wages to 2 million people, which will be a welcome boost to families across the UK. According to the government website, the increase in the minimum wage is supposed to help support the “living standards of low-paid workers”.

In theory, this increase means people are going to be paid more. In reality raising the wages forces business owners to raise product prices, prompting inflation. For example, an average UK wage growth of 4.2% in November 2021 was lesser than the CPI inflation rate of 5.1%. *

How will this affect working people?

There are different ways in which this change could affect people in a positive way.

For example, the increase for people between 21 and 22 years old is the highest, increasing by 82p per hour. That’s £6.56 increase a day for anyone in that age bracket working 8 hours a day. Assuming they work 5 days a week, that’s a £32.80 increase a week.
This increase could help young people achieve their financial goals slightly sooner, by being able to save up for independent living and better healthcare.

Again, this would also depend on the changes in inflation.

How will this affect employers?

As mentioned previously, the main impact to employers will be all the added costs.

The current business climate looks challenging, particularly with the Brexit and Covid impacts, as well as the end of government furlough programme at the end of September 2021.

Cheap labour apprenticeships could be appealing to most employers. However, achieving this cost saving might be difficult with millions of unfilled vacancies.
UK employers will likely need to incur more costs in order to attain the right level of employees.
This is as most of the government schemes such as Kickstart are coming to a close.

What/who else will it benefit and how?

The economy may also benefit from this change. Considering that people will be paid more, they may be more likely to put that money not only into savings but also into themselves. Whether it’s being able to afford more/better quality food, a gym membership, or anything else, that money is being put back into the economy.

Conclusion:

Both, the National Minimum and the National Living Wage are increasing on the 6th April 2022. The government hopes that this will help support people with low paying jobs. There is also hope that people will be able to then afford a better quality of life for themselves and those they care about.

* We will discuss inflation in more detail in a future blog.