All information provided in this newsletter was correct at the time of publishing.
There are some important changes to statutory rates of pay that the Government have already announced, to take effect in 2023.
National Minimum/Living Wage Rate Increases & Accommodation Rate
The National Living Wage is to rise by 9.7% which is the biggest cash increase ever. It will go from £9.50 to £10.42 per hour.
At the same time, the National Minimum Wage (NMW) rates will be increased as follows:
- from £9.18 to £10.18 per hour for 21 to 22-year olds;
- from £6.83 to £7.49 per hour for 18 to 20-year olds;
- from £4.81 to £5.28 per hour for 16 & 17-year olds; and
- from £4.81 to £5.28 per hour for apprentices;
If you provide some form of staff housing as part of the contractual arrangements, then the daily accommodation offset will apply. This will change from the current rate of £8.70 per day to £9.10.
The effect of accommodation rates on the National Minimum Wage or National Living Wage depends on how much an employer actually charges for accommodation. It’s calculated by ‘pay period’, the frequency interval that someone is being paid. If the accommodation is free, it still affects the minimum wage. It does not matter if the cost of the accommodation is taken from the worker’s wages beforehand, or if the worker pays the cost after they get their wages.
Some examples the Government website provides is based on the current rate:
Example 1: accommodation is free
John is 24 and gets £7.60 an hour. This is below the National Living Wage (which he should get as he’s over 23). He works 30 hours a week. He gets paid every 7 days (his pay period). His employer provides free accommodation 7 days a week. This brings John’s pay up to £9.63 an hour, which is above the National Living Wage of £9.50.
- £8.70 (offset rate used when accommodation is free) × 7 (days accommodation provided in pay period) = £60.90
- £60.90 + (£7.60 × 30 – the total pay in reference period) = £288.90
- £288.90 ÷ 30 (total hours in pay period) = £9.63
Example 2: accommodation is charged below the maximum rate
Lisa is 22 and gets £9.30 an hour. This is above the National Minimum Wage. Her employer charges £6.50 per day for accommodation which is below the threshold of £8.70. No offset rate is applied.
The accommodation charge does not affect Lisa’s pay of £9.30 an hour.
Example 3: accommodation is charged above the maximum rate
Sam is 35 and gets £9.60 an hour. This is above the National Living Wage (which he should get as he’s over 23). He works 40 hours a week. He gets paid every 3 weeks (his pay period). His employer charges £9.50 per day for accommodation. Sam lives in the accommodation full time which is 21 days for his pay period. This brings Sam’s pay down to £9.46 an hour, which is below the National Living Wage.
- £9.60 (hourly rate) × 120 (total hours in pay period) = £1,152
- £9.50 (accommodation rate) × 21 (days accommodation provided in pay period) = £199.50
- £8.70 (offset rate used when accommodation is free) × 21 (days accommodation provided in pay period) = £182.70
- £1,152 (total pay in pay period) – £199.50 (total accommodation cost in pay period) + £182.70 (total accommodation offset in pay period) = £1,135.20
- £1,135.20 ÷ 120 (total hours in pay period) = £9.46
Increased Statutory Rates
The rate for 2023/24 for Statutory Maternity (SMP), Paternity (SPP), Adoption (SAP), Parental Bereavement (SPBP) and Shared Parental (SShPP) Pay are set to increase from £156.66 to £172.48 per week.
Additionally, the rate of Statutory Sick Pay (SSP) is also set to increase from £99.35 to £109.40 per week.
The average earnings an employee has to earn to be entitled to these payments will remain at £123.00 per week.
The rates for Statutory Redundancy Pay, Statutory Guarantee Pay, and Tribunal Awards are not yet announced. We will send an update as soon as the new rates are published. They are usually expected in March.
Exact dates of implementation are still to be confirmed, and it is worth noting that they do not all usually increase on the same date. It is expected that SMP, SPP etc. will increase on 2 April 2023, and SSP will increase on 6 April 2023. The NLW and NMW rates go up from 1 April 2023.
Extra Public/Bank Holiday in 2023
We will be sending out a separate newsletter shortly on this which will give you more information.
Changes to Existing Rights
There have also been some well published amendments to existing rights that may become law in 2023. Flexible working has been given a lot of attention following increased interest in hybrid working, and the Government’s announcement that they want to make it the “default” position. To do this, the Government have committed to the following changes.
- Make flexible working a day-one right.
- Require employers to consult with the employee before rejecting a request.
- Allow two flexible working requests in any 12-month period.
- Shorten response time to two months.
- Remove need for employees to set out how the employer will deal with impact of request.
This is hoped to make flexible working more accessible, and the process less onerous on the employee. Crucially, however, it does not give employees any greater rights to demand flexible working. Instead, it requires more from employers during the process of negotiating flexible working, and places them under a greater burden if intending to refuse the request (such as the need to consult).
Under current rules, before offering redundancy to an employee on maternity, shared parental or adoption leave, employers have an obligation to offer them a suitable alternative vacancy where one exists. The proposal is that this protection will apply through an expanded period covering from when a woman tells her employer she is pregnant until 18 months after the birth. The 18-month window ensures that a mother returning from a year of maternity leave can receive six months of additional redundancy protection. The 18-month window will also apply to adoption and shared parental leave.
Finally, UK employment law is on the brink of massive change and we cannot yet say exactly what impact this will have. Legal changes have been proposed to “deal with” EU law that remain in place in the UK. The Retained EU Law (Revocation and Reform) Bill will automatically repeal retained EU law on 31 December 2023 unless legislation is introduced to keep it.
Laws that could change or expire include the following.
- TUPE (unlikely to be scrapped, but could be amended to allow harmonisation of terms).
- Rights to paid annual leave (such as how to calculate a week’s pay).
- Maximum 48 hour working week.
- Agency worker regulations.
- Part-time and fixed-term worker regulations.
There are also nearly 60 pieces of European Health & Safety legislation that if repealed would have a significantly detrimental effect on the workplace.
Future Legal Rights
A number of Bills giving new rights are on their way to become law. However, due to the nature of this process, it is not possible to say with certainty if this will happen this year, or what the details of these new rights will be, as they may still be changed. Nevertheless, it is important to be aware of what might be coming so that initial plans can be prepared.
One of these rights is that of carer’s leave. This new right, if passed into law in its current form, will give unpaid carers the right of up to a week of unpaid leave per year, to be used to provide care for someone dependant on them. This is similar to the existing right to time off for dependants, differing however in its time limit of “up to one week per year”.
Neonatal Leave and Pay
Another new right that may potentially come into law in 2023 is neonatal leave and pay. This right, applicable from day one but subject to a qualifying criterion for pay, will allow parents of very sick babies (defined as those admitted to hospital up to 28 days after birth, requiring a continuous stay of seven days or more) a period of up to 12 weeks leave to be with their baby in neonatal care. This will be taken in addition to existing maternity/adoption/paternity rights.
Another new right that is expected to come into law is one that will allow workers to keep 100% of tips and gratuities paid to them, whether by card or cash, or as a service charge. Employers will be under a duty to keep accurate records of tips distribution; employees will have a new right to bring a claim if not.
Our consultants would be pleased to advise you on any element of the issues arising from this newsletter.