Category: <span>Wages</span>

Increased rates for family friendly leave and long-term sickness this April.

Following up from last month’s announcement regarding the minimum wage increase, the government have proposed an increase to the existing statutory rates. The Legislation will entitle employees whom qualify to a statutory payments whilst taking a period of sick leave, or ‘family friendly leave’ which includes maternity, paternity and adoption leave. The rates set will be reviewed each year and the increases will be implemented in April 2020.

Statutory maternity rates of pay are set to increase on the 5th of April.

Employees will be entitled to the weekly increased rate of £151.20, up from £148.68, the qualifying criteria will not change. What this means is that anyone whose average weekly earnings are below than this statutory rate will be entitled to receive 90% of their average weekly earnings. Pay rates for employees taking maternity or adoption leave will also be entitled to the same increase again rising to £151.20 weekly.

On the 6th April 2020, a day later statutory sick pay is set to increase, keeping in line with the first Monday of the new tax year. Employees, from this date forward, will then be entitled to £95.85 weekly. Employees will only be able to receive this increase if their earnings are above or equal to the lower earnings cap. At present this stands at £118 per week and it is expected that a new lower earnings limit is set to be announced.

Before April, companies and organisations should review the policies they have in place for statutory leave and make sure that they are all up to date. For organisations that already offer statutory minimum pay for periods of leave should by now already be familiar with how the process works and its very important that the payroll departments understands that they will need to abide by the increased rates. Failure to pay the correct amount could end in a tribunal and can be very costly.

It’s also important to understand how the new rates will impact any employee’s that are already in a period of statutory leave. When the new rates are introduced, existing payments will need to be reviewed and increased where necessary, this will ensure staff are remunerated accordingly.

As has become routine in recent years, a new set of minimum wage rates will become effective on 1 April 2020.

Prior to the New Year, the government confirmed several increases to the existing national minimum wage (NMW) rates that will be introduced in April, describing these changes as the ‘biggest ever cash boost’ for UK workers.

The existing structure, which provides separate hourly rates to staff based on separate age categories will remain intact and individuals will benefit from an hourly increase of between 4.6 and 6.5 percent, depending on their age. These new rates are as follows:

• National Living Wage for ages 25 and above – £8.72 (6.2 per cent increase)
• 21 to 24-year-olds – £8.20 (6.5 per cent increase)
• 18 to 20-year-olds – £6.45 (4.9 per cent increase)
• Over CSA to 17 – £4.55 (4.6 per cent increase)
• Apprentices under 19, or 19+ but in first year of apprenticeship – £4.15 (6.4 per cent increase)

As a result of these increases, almost three million workers in Britain are set to receive a pay rise of more than four times the rate of inflation. In real terms, this should equate to an increase of around £930 a year for a full time worker who is paid in line with the National Living Wage.

It is also worth remembering that the hourly rates associated with voluntary ‘Real Living Wage’ underwent a similar increase in November 2019, meaning committed organisations are now required to pay staff the enhanced rates of £10.75 per hour in London and £9.20 for the rest of the UK.

In the lead up to April, organisations should work with their payroll department to ensure the new hourly rates are reflected in staff salaries, starting from the relevant pay reference period. Given the different age categories it is imperative that organisations double check information on employees’ dates of birth ahead of time to ensure this is correct.

For clarity’s sake, organisations should also notify staff of the pay rise ahead of time with written confirmation. This transparency is likely to be well received and could help build positive employee relations.

Whilst, there are several months until these new rates are introduced, organisations should avoid leaving preparations until the last minute. After all, failing to implement these new rates on time will place organisations in breach of national minimum wage law and could also lead to significant reputational damage.

The Living Wage Foundation has outlined that rates have increased to £10.75 for workers based in London, and £9.30 for those in the rest of the UK.

Reviewed each year by the Living Wage Foundation, the voluntary Living Wage is based on the ‘real’ cost of living as is set by the Foundation, which is calculated by basing averages on a ‘basket of household goods and services’. Its purpose is to provide workers with higher minimum wage rates than what is currently facilitated by the government. As a voluntary scheme, organisations can choose to opt-in to paying the higher minimum wages but, once they have done so, must ensure worker salaries to fall into line with the rates as set by the Foundation.

These increases are as follows:

• London Living Wage – increases by 1.8 per cent from £10.55 to £10.75 per hour
• UK Living Wage – increases by 3.3 per cent from £9.00 to £9.30 per hour.

Going forward, all organisations who provide the ‘real’ Living Wage will now have until 1 May 2020 to implement these changes, although they are encouraged to do so as soon as possible. As of 2019, over 6,000 UK businesses have signed up to the scheme, which has resulted in a pay rise for in excess of 180,000 employees. This includes around one third of the FTSE 100, alongside recognisable, high-profile operators such as IKEA, ITV and Everton.

Although voluntary, providing the ‘real’ Living Wage can be an effective measure of both attracting employees to an organisation and retaining them. With Brexit uncertainty continuing to dominate the headlines, organisations may wish to consider introducing new measures that can assist them in finding the individuals they need to in order to ensure continued company development and progression.

The ‘real’ Living Wage is not to be confused with the National Living Wage (NLW). The NLW was introduced by the government in April 2016 and is the statutory minimum hourly rate that should be paid to all workers aged 25 and over. As the previously expected autumn budget has now been delayed due to the upcoming General Election, we still are unaware of what the new statutory rates will be come April 2020.

That said, organisations should make sure they are up to date with these developments. Those who do not pass on the increases to statutory rates will be operating in breach of the law. This could result in penalty fines of up to 200 per cent of the underpayment, which can be up to a maximum of £20,000 per worker.