How will the rising National Minimum Wage and Statutory Sick Pay impact your business?
From April, the rates of Statutory Sick Pay and the National Minimum Wage will change, impacting your payroll obligations.
As well as the added administrative duties to ensure you are paying the correct wage, the significant rises in the rates of pay are likely to impact your cash flow position.
Balancing the need for compliance and protecting your business from increased costs requires careful consideration.
We recommend seeking our advice to effectively evaluate your current business systems to identify the most-effective ways to manage an increase in costs.
What are the changes?
From 1 April, the National Living Wage (NLW) will expand to include those who are 21 years old.
Any employees affected by this change will need to be moved onto the NLW when necessary.
Here is a reminder of the new rates:
Age
Rate from 1 April 2023
Rate from 1 April 2024
Workers aged 21 and over (NLW)
£10.42
£11.44
18-20-year-olds
£7.49
£8.60
16-17-year-olds
£5.28
£6.40
Apprentices under 19, or over 19 and in the first year of their apprenticeship
£5.28
£6.40
As well as an increase in the minimum wage, there will also be an increase in Statutory Sick Pay – the pay will rise from 6 April, increasing from £109.40 to £116.75.
The increase in these rates could also affect your payroll so you need to know what to do to avoid these risks.
The new rates of pay will take effect from 1 April for NLW and NMW, and 6 April for SSP – it is important you know how to protect your business before these dates.
For example, an inefficient payroll might lead to the underpayment of staff which could lead to reduced productivity and a loss in staff overall.
Here’s how you can maintain a successful payroll amongst rising rates of pay:
- Conduct an audit – it is important to conduct a full audit as it will assess your current process and identify opportunities where you can implement more effective procedures.
- Improve communication – catch-up with your payroll staff to ensure they are completing tasks on time and accurately or if they need more support.
- Check your data – sometimes these errors can occur due to incorrect employee onboarding information; make sure your employees regularly update their details in case their circumstances affect payroll.
- Train your employees – if you have an in-house payroll team, make sure they are full trained and are updated annually with any changes to legislation. You might choose to outsource your payroll instead which can help to free up valuable time, reduce ongoing costs and provide you with the knowledge your payroll will be accurate and timely – get in touch with our payroll experts for more
- Invest in payroll software – human errors are unavoidable so using payroll software will help to both prevent and identify errors. The software will make your payroll process more efficient and compliant whilst also reducing human input and overall increasing accuracy.
An efficient payroll allows you to pay your employees correctly and on time, all the time – seeking the advice of our experts will help to combat these potential challenges.
How can I protect my business against the changes?
The rising rates of payment for workers might present you with the challenge of balancing compliance with your tax obligations and profitability for your business.
Before the new rates come into effect from April, you should manage and minimise your costs through strategic planning.
Strategies you might consider include:
- Optimising staffing efficiency – you should analyse your peak and off-peak times to adjust your staffing levels accordingly. This will ensure you have sufficient workers to cope with any busy periods you encounter whilst not underpaying your staff during slow periods.
- Upskilling your employees – invest in your current team as this will enhance productivity and retain employees whilst increasing your employees’ capability. This will further increase the satisfaction of your customers and reduce recruitment costs – you need to implement technology to automate your mundane tasks (like processing orders or managing your inventory) as this will reduce manual labour costs and increase efficiency.
- Strategically adjusting your prices – any and all price increases must be clearly communicated and justified to customers to avoid deterring them.
It is important you comply with the new NMW rates as you risk financial penalties as well making possible back payments to your employees.
The changes made to these rates of pay might affect your employees - it is crucial you know how the changes will affect your business and what you can do to implement them before they come into effect.
Our experts can offer you tailored advice on how to adjust to the changes and minimise your costs to ensure compliance.
If you would like to know more about how the new rates of minimum wage and sick pay with affect you, please get in touch with the team at Iceberg Accounting.