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Largest increase to minimum wage - what do those responsible for payroll need to consider?

View profile for Adam Pennington
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Employers obligations regarding gender pay gap reporting

The government has announced a 9.8% increase in the National Living Wage (NLW), raising it to £11.44 per hour, starting from April 1, 2024. Additionally, NLW eligibility will be widened by lowering the age threshold to 21 years for the first time, resulting in a 12.4% raise for those impacted.

The government has increased the penalties for underpayment and companies can face both criminal and civil charges for underpayment. Businesses can now be fined up to £20,000 per employee and the government is committed to publishing the names of companies who do not comply in regular ‘naming round.’

Payments of national minimum wage are more complex than simple payroll adjustments and other factors need to be considered when considering payroll. For instance, if an employee makes a salary sacrifice for childcare vouchers under the previous scheme or other this in effect lowers their salary and can then bring it below the national minimum wage. Other scenarios, that may not naturally be thought of that could take an employee salary below NMW include:

  • Repayments through salary for causing damage to a vehicle due to reckless driving
  • Buying holiday
  • Repayment of a wage advance or loan
  • Rectifying an overpayment made by mistake
  • Purchasing shares, securities, or share options in the business
  • Deductions related to accommodation provided by the employer
  • Benefits received by the employee
  • Repaying costs incurred for voluntary training, provided the employee has given prior written agreement

In these instances, employers may accidentally fall foul of the national minium wage payments. It is important to understand what payments are required for the different age groups from the 1st April:

Wage bandNMW rates from 1 April 2024Increase in pencePercentage increase
National Living Wage (21 and over)£11.44£1.029.8%
18-20 year old rate£8.60£1.1114.8%
16-17 year old rate£6.40£1.1221.2%
Apprentice rate£6.40£1.1221.2%
Accommodation offset£9.99£0.899.8%


In addition to considering the factors that may reduce an employees pay companies need to be mindful that they are paying the correct amount for overtime, any gifts vouchers and bonuses are considered as well as the accommodation offset outlined above. Employers need to ensure they are ready for the change or face financial penalties and reputational damage.