National Minimum WageSome big changes are coming up in payroll for 2022/23. One of the largest and most significant changes is the increase in the National Minimum Wage (NMW). The Chancellor, Rishi Sunak, said that the increase “ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this parliament“. This increase has been welcomed by workers. However, it could significantly strain small-to-medium-sized businesses as the increase in National Insurance contributions will impact them. There is concern about the unintended consequences of the minimum wage increase on employment. When employees are more costly, employers may hire less staff. However, if a low wage employer is required to raise their pay, fewer employees will leave to take other jobs.

Don’t be afraid to seek advice

Businesses often find that the national minimum wage is an area where they get caught out. Is your business considering making deducting from the employees’ pay? If so, we recommend extreme caution. For example, these deductions could include:

  • Deductions under salary sacrifice
  • Saving schemes, such as a Christmas club

National minimum wage increases

From April 2022, National Insurance Contributions (NICs) paid by both employed and self-employed workers will rise by 1.25% with the intention of helping to fund the health and social care sector.

1st April 2022 marks the date that the increases are due. The payroll team at Menzies can assist in checking you are meeting the minimum wage requirements.

The National Minimum Wage rates from 1st April 2022 are:

Age Hourly Rate
23+ £9.50
21-22 £9.18
18-20 £6.83
16-17 £4.81
Apprentice Rate £4.81

Key statistics

The key statistics relating to this change are:

  • National Insurance for 2022/23 will increase by an additional 1.25%
  • Employers will pay NI after the annual threshold of £8,840 at 15.05%
  • Employees will pay NI after the annual threshold of £9,880 at 13.25%
  • The personal tax-free allowance is frozen at £12,570 for Tax Codes this tax year, the first time since 2010 that the personal tax-free allowance has not increased.
  • The higher rate threshold is also frozen and remains at £50,270 for 2022/23
  • Employment Allowance remains at £4,000
  • Eligibility criteria remains the same as 2021/22.

Although additional funding for social care is a decision that has been welcomed by many, the rise in National Insurance Contributions and National Minimum Wage will have an effect on businesses. The rate change will make hiring new staff more expensive for employers and is an additional strain on businesses that have been struggling to recover due to the pandemic.

If a business ever has any queries relating to the minimum wage changes, it is always best to seek advice from a specialist payroll or employment tax solutions team.

Menzies LogoMenzies is a top 25 leading firm of accountants, finance and business advisors that operate out of a network of offices across Surrey, Hampshire and London, providing our clients with easy access and local knowledge. Described as the ‘best performing firm outside of the top 10’ by Accountancy Magazine, Menzies has over 400 employees and an annual turnover of more than £40m.


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