Minimum wage increase:
Minimum wage rates are set out by the government to ensure workers are paid a certain amount for the hours they work. The minimum wage rate will vary depending on the employee’s age and whether they are an apprentice. Employers are required to pay staff at least the national minimum wage for their age group and can receive fines if they do not comply.
From April 2019 millions of workers in Britain will see their pay increase as the National Minimum Wage jumps to £8.21 an hour. This is a pay increase of 4.9% for those aged 25 and above. Employee’s between 16-24 will also benefit from a pay increase in addition to apprentices who will see their pay increase by 5.4%.
The current minimum wage:
• Aged 25 + £7.83 an hour
• Aged 21-24 £7.38 an hour
• Aged 18-20 £5.90 an hour
• Aged 16-18 £4.20 an hour
• Apprentices £3.70 an hour
The new minimum wage:
• Aged 25 + £8.21 an hour (4.9% increase)
• Aged 21-24 £7.70 an hour (4.3% increase)
• Aged 18-20 £6.15 an hour (4.2% increase)
• Aged 16-18 £4.35 an hour (3.6% increase)
• Apprentices £3.90 an hour (5.4% increase)
Revised tax threshold:
In addition to the increase in national minimum wage, the tax-free allowance will also increase from £11,850 to £12,500. What does this mean for employees? On average, employees can enjoy an extra £130 out of their annual wages, which they would have paid in tax during the 18-19 tax year.
What does this mean for employers? Employers have a legal obligation to ensure that all members of staff are being paid at least the minimum wage for their age group. If an employer fails to keep up with the minimum wage changes, they can be reported to HMRC where they can face a financial penalty of up to 100% of the unpaid wages and a higher maximum penalty of up to £20,000 per employee. This is in addition to backdating the underpayment to their staff member.
New minimum pension contributions:
In addition to minimum wage increases, the minimum pension contributions are also set to increase. Currently, employees contribute 3% of their earnings into their pension fund, which is topped up by a 2% contribution from their employer. This sets aside a minimum contribution of 5% per pay day. From 6th April 2019 employers are required to increase staff contributions to 5% before topping up their pension fund with a 3% employer contribution, giving an overall minimum contribution of 8% per pay day. Of course, employers can choose to pay the full minimum contribution so staff members do not suffer any deductions, or they can pay above their 3% contribution. This is for the employer and employee to arrange together.
Employers are required to ensure the correct minimum contributions are being paid (Pension Act 2008) and should let their staff know these increases are being applied.