National Living Wage increases: what small businesses need to know

Finance and legal

27 March 2024

It’s been eight years since the government introduced the National Living Wage (NLW), and it’s set to increase again this April.

The new rate applies from 1 April 2024, meaning that all employers, big and small, will need to make sure their payroll is up to date. With this upcoming change, your business should be fully prepared for the extra cost, the bureaucracy and any wider impact it may have.

So, what does the new National Living Wage mean for you?

What is the National Living Wage?

As an employer you are required, by law, to pay your employees a minimum amount for their hours worked. This is referred to as

  • National Living Wage (NLW) for employees aged 21 or over
  • National Minimum Wage (NMW) for employees aged under 21, or an apprentice

The government is responsible for reviewing these rates, and typically updates them each year in April.

What are the new rates?

The new minimum rates for 2024 come into force from 1 April. The updated figures from the GOV.UK website are as follows:

Apprentice*   £6.40/hour
Under 18  £6.40/hour
18 to 20 £8.60/hour
21 and over £11.44/hour

*Apprentices are entitled to the apprentice rate if they’re either aged under 19, or aged 19 and over and in the first year of their apprenticeship. Apprentices who are 19 or over and have completed their first year of their apprenticeship are entitled to the minimum wage for their age. If you employ an apprentice and you’re still unsure which pay level would apply to them, you can find some examples here.

In addition to the changes to the rates of pay, from 1 April 2024, workers aged 21 and over will now be entitled to the National Living Wage. This is a significant change from previous years during which the NLW applied for those aged 23 and over. This increase, paired with the impacts of the cost of living crisis on small businesses, may mean that it’s a good time to revisit your cash flow statement.

How does this mean for my business?

What should I do next?

Just like when the NLW was introduced, it pays to be prepared. That means:

  • Checking which rate applies to your team.
  • Updating the company payroll to ensure all employees receive their correct pay amount going forward.
  • Informing your staff of the changes to their pay.

You can read more about who is entitled to the minimum wage here.

Future planning

Why not take this chance to run a performance review with your employees? With the changes set to take place, now could be a perfect time to discuss pay and work conditions with your team. Find out if your employees are happy with the way they’re working, and if not, consider what changes you can make. If you’re unsure how to measure satisfaction levels in your small business, you can find help and advice in our handy guide.

Additionally, with the NLW rising, it may be worth looking at the ways you can retain the existing talent you have and how you can support them in reaching their full potential. Once you’ve found the right people for the right roles, it’s likely that you won’t want to lose them. You can find more info around employee retention strategies here.

And however tight your budget, make sure you have sufficient safeguards in terms of emergency financing options and business insurance cover.

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