How much is the Minimum Wage and is it increasing?

What is the new minimum wage?

Don’t worry, it’s not a daft question to ask how much the minimum wage is. In fact, every year since its inception, the minimum wage has increased.

Coming up this April, we will see the largest increase in the national living wage ever (9.8%) as a result of inflation and the cost of living. Here’s a full breakdown of the new minimums:

• New National Living Wage (21 and over) – £11.44, increased from £10.42 (£1.02 difference).
• New minimum wage for 18-20-year-olds – £8.60, increased from £7.49 (£1.11 difference).
• New minimum wage for 16–17-year-olds – £6.40, increased from £5.28 (£1.12 difference).
• New apprenticeship wage – £6.40, increased from £5.28 (£1.12 difference).

So, if you’re over 21 and asking how much the minimum wage is, the answer is £10.42 per hour, which will become £11.44 on April 1st.

To calculate how much your new wage is per year, you can use this handy salary calculator. You’ll simply need to know your pension contributions and student loan repayment plan (if you have one).

There may even be a way for you to save even more tax on your salary with our handy guide on how much you can earn before tax.

Now, you’ve probably taken all you need from this blog already. You wanted to know how much the minimum wage is, and we’ve answered. However, we couldn’t just leave it there! Let’s dive a bit deeper into the history of the minimum wage and how it affects small business owners.

The history of the minimum wage

Back in 1909, the UK was one of the first countries to introduce the minimum wage. However, it was more of a temporary measure that was to be phased out over time.

However, it was officially brought back in 1999 to address those working while still living in poverty.

Since its introduction, the minimum wage has increased every year, with its largest increase coming this April. Check out this graph to see how the minimum wage has changed over time.

Since its inception, the minimum wage has undergone a rebrand. In 2016, the introduction of the national living wage aimed to set up a higher minimum wage for individuals over 25, representing an increase from the previous minimum wage for those over 21.

Essentially, the national living wage was introduced to help with the cost of living. Especially for those working in sectors that historically relied on cheaper labour, such as retail.

The national living wage is not to be mistaken for the real living wage. The Real Living Wage Foundation is an independent body that assesses what they believe the national living wage should be.

How much is the minimum wage affecting businesses?

This is a question particularly smaller or struggling business owners may be asking themselves.

If we purely look at the books, an increase in the minimum wage means an increase in costs for SMEs. Additionally, with the UK currently entering a recession, the pressure may be on to make adjustments to how businesses operate.

Now, if you find your business is struggling financially, there is no one-size-fits-all solution. If you need expert advice contact us.

However, there are usually two textbook actions a business might consider when there is an increase in the minimum wage:

Increasing prices: When costs go up, prices can also increase, passing the cost onto the end-user or customer. Increasing prices seems like a simple fix, and if you’re selling a necessity, like running water, it could very well be.

However, for most businesses, an increase in prices can result in a drop-off in demand for their product. If demand drops too much it could leave SMEs with the same or less revenue than when they started.

Cutting costs: To keep the same revenue, some businesses may decide to cut costs. Note that cutting costs does not necessarily mean a reduction in the workforce; it could mean putting a freeze on new hires or removing unnecessary expenses within the business.

As mentioned, if you decide to go down the cost-cutting route, we recommend you speak to an accountant for the best advice.

What role will payroll play?

When it comes to payroll and pay increases, there are a few things your department must do to get everything running smoothly.

First, your team will need to adjust the pay of all current minimum wage employees to align with the new rate.

Second, concerning payroll, they need to assess current staff who received payment according to the national living wage previously to ensure they have not fallen below the new national living wage.

To calculate this, payroll needs to divide the monthly pay of employees by the number of hours worked to find the hourly total.

Conclusions

With the national living wage set to receive its largest-ever increase this April, we expect that the average worker will receive much-needed support in addressing the cost-of-living crisis.

For businesses, the impact of this increase will largely depend on their circumstances. Some may be able to absorb the additional cost, recognizing the potential to enhance productivity.

If you’re a business owner concerned about the extra expenses associated with the new rate, feel free to get in touch with us today.

Get a full breakdown of everything involved in paying staff and getting paid as an employee in our Guide to Payroll.