The changes announced in the Budget mean that from April 2025 the new annual minimum wage for someone working 37.5 hours per week will be approximately £23,800. The likely outcome of this is that a greater proportion of the workforce will be paid at the NMW rate. In itself, this increases risks arising from NMW non-compliance, as more workers are likely to be affected.
As well as working out how to fund the increase in NMW rates, employers will also need to work through the impact on their wider pay structures. The increases in NMW rates over the last several years has created a "bunching" effect at the lower end of many employers' pay structures, which is now causing difficulties as lower pay bands become harder to differentiate.
It also means employers who provide benefits which are paid for via deductions from pay are at increased risk of falling foul of NMW requirements, including where such deductions are made via salary sacrifice (e.g. pension contributions and cycle-to-work schemes). The law in relation to NMW is technical and complex. It is not uncommon for employers who are trying to act in workers' best interests and providing benefits which their workers have asked for finding themselves under scrutiny and in some cases being penalised by HMRC's NMW unit.
