In his Autumn Statement 2016 the Chancellor announced changes to the national living wage (NLW), the national minimum wage (NMW) and employers’ NI contributions. What do you need to know?
Up first. In his Autumn Statement 2016 the Chancellor announced some important changes for businesses (see The next step ). The first relates to the national living wage (NLW) and the national minimum wage (NMW). Currently, the NLW – which must be paid to all workers aged 25 and over – is £7.20 p.h. On 1 April 2017 it will rise by 30p to £7.50 p.h. This uplift is much lower than the 45p increase that experts had predicted.
Two sides. Whilst this could loosely be described as good news, there is a downside in the not too distant future. The government has set an NLW target of at least £9 p.h. by 1 April 2020. In order to achieve this there will need to be an average NLW increase of 83p p.h. from 2018 to 2020. It’s unclear what the government will actually do in future years so our advice is to base your pay forecasts on this average.
NMW changes. In addition, all four NMW rates will change on 1 April 2017. The adult rate rises from £6.95 p.h. to £7.05 p.h. ; the rate for 18 to 20 year olds rises from £5.55 p.h. to £5.60 p.h. ; the 16 to 17 year old rate rises from £4.00 p.h. to £ 4.05 p.h. and the apprentice rate rises from £3.40 p.h. to £3.50 p.h.
NI alignment. Also from April 2017 employers’ and employees’ NI contribution rates will be aligned so both will start paying NI on weekly earnings above £157.
Note. It’s estimated that the forthcoming NI alignment will cost employers a maximum of £7.18 per employee.