The National Living Wage Increase in 2024
by Kelly Wallace Horne
The 1st April 2024 sees what the UK Government has called “the biggest ever cash boost” to the National Living Wage. Every year on the 1st April the Government raises the National Minimum Wage and National Living Wage in accordance with advice from the Low Pay Commission.
In 2024 the National Living Wage is set to rise by 9.8% for over 23s, and 12.4% for over 21s. This is inevitably going to receive a mixed response. Whilst workers will be looking forward to a boost to their income, some employers will struggle to meet these new legal requirements.
In this article, we outline the changes and how they affect workers and employers in the equine industry.
What is the difference between the National Minimum Wage and the National Living Wage?
Both the National Minimum Wage and the National Living Wage is the minimum amount of money per hour that employers must pay their employees. Both are divided by age, not experience or skill, and both are a legal requirement, and carry hefty fines for employers found not to have been paying at least these amounts per hour worked.
The National Minimum Wage applies to younger workers while the National Living Wage applies to all other workers.
Until 1st April 2021, the National Minimum Wage applied to most workers aged 16-24 years and Apprentices. It was split into age bands of:
- an Apprentice Rate,
- the National Minimum Wage for 16-17 year olds, 18-20 year olds, 21-24 year olds,
- the National Living Wage for anyone aged 25 or more.
From 1st April 2021, the National Living Wage band increased to include everyone aged 23 or more.
From 1st April 2024, the National Living Wage band increases to include everyone aged 21 or more.
The reason the Low Pay Commission gives for having different levels of wage depending on your age is that there is “evidence that younger workers are more at risk of being priced out of jobs than older workers, with worse consequences if they end up unemployed.”
*The National Minimum Wage and National Living Wage apply to the majority of workers. Exceptions include workers who receive accommodation as part of their employment, in which case the Accommodation Offset Rate can be deducted from the National Minimum and Living Wages – find out more here. Another exception within the equine industry is those working in the horse racing sector. The National Trainers Federation sets the minimum wage for workers in the racing industry – find out more here.
What are the new National Minimum Wage and National Living Wage rates?
From 1st April 2024, the new National Minimum Wage and Living Wage rates are:
- Apprentice Rate: £6.40
- Under 18: £6.40
- Aged 18 to 20 years: £8.60
- Aged 21 and over: £11.44
Why has the UK Government agreed to such a large increase?
Each year the wage increases are set by the Low Pay Commission, which is an independent body that advises the government about the National Living Wage and the National Minimum Wage.
In 2019, the then UK Prime Minister Boris Johnson said, “Hard work should always pay, but for too long, people haven’t seen the pay rises they deserve”. The rise followed the Conservatives’ promise during its annual conference in September 2019 to increase the National Living Wage to £10.50 an hour within five years if “economic conditions allow”. The Conservatives had also written the pledge into their manifesto, which would see an individual’s net earnings rise by £1,900 over five years. In 2024, the National Living Wage is set to exceed this, however, the cost of living has gone up significantly since 2019.
In 2019, the then Chancellor Sajid Javid said, “We want to end low pay and put more money in the pockets of hard-working families. This latest rise will mean that since we introduced the National Living Wage in 2016, the lowest paid will have had a wage increase of more than £3,600.”
In 2023, the current Chancellor, Jeremy Hunt said that the 2024 National Living Wage “will end low pay”.
You can read more about the 2024 National Living Wage increase on the Government website here.
What this means for workers
The calculations below are gross (before income tax and National Insurance are deducted) and assume the Accommodation Offset Rate hasn’t been applied to the wage.
Apprentices:
Government guidelines on maximum working hours state that Apprentices under 18 years of age must not work more than a 5 day week at 40 hours a week/8 hours a day.
Currently (February 2024), workers under 18 years of age earn a minimum of £5.28 an hour, which gives them a gross daily rate of £42.24 for an 8 hour day, or £211.20 per 5 day week. The new National Minimum Wage for under 18’s is £6.40 an hour, or £51.20 per 8 hours day, or £256 per 5 day week. This is an increase of £8.96 per 8 hour day, or £44.80 per 5 day week.
Under 18:
Government guidelines on maximum working hours state that someone under 18 years of age must not work more than 40 hours a week or 8 hours a day. For this reason, I’ve calculated a daily rate for this age bracket.
Currently (February 2024), workers under 18 years of age earn a minimum of £5.28 an hour, which gives them a gross daily rate of £42.24 for an 8 hour day, or £211.20 per 5 day week. The new National Minimum Wage for under 18’s is £6.40 an hour, or £51.20 per 8 hours day, or £256 per 5 day week. This is an increase of £8.96 per 8 hour day, or £44.80 per 5 day week.
Aged 18-20:
Currently (February 2024), workers aged 18-20 earn a minimum of £7.49 an hour, which gives them a gross annual salary of *£18,695.04. From the 1st April the new National Minimum Wage for 18-20 year olds is £8.60 an hour, or *£21,465.60 annually. This is an annual increase of *£2,770.56.
*Based on a 6 day/48 hour week
Aged 21 and over:
Currently (February 2024), workers aged 21 fall into the Aged 21-22 rate and earn a minimum of £10.18 an hour, which gives them a gross annual salary of *£25,409.28. From 1st April 2024, workers aged 21 yrs fall into the National Living Wage band and are entitled to at least £11.44 an hour, or *£28,554.24 annually. This is an annual increase of *£3,144.96
*Based on a 6 day/48 hour week
The wider effect of the National Living Wage increase
In just 5 years since April 2019, the National Living Wage has increased by £3.23 an hour for workers aged 25 or more. This is significantly higher for workers aged 21-23, who wouldn’t have qualified for the National Living Wage 5 years ago in 2019.
It’s also worth taking into consideration that these increases to the National Living Wage effectively close the pay gap between legal minimum pay and the salaries of those already earning more than the National Living Wage. To put some perspective on this; just two years ago, in February 2022, an hourly rate of £12 was an attractive wage for a more experienced/skilled Groom, with the National Living Wage being just £8.91. From 1st April 2024, those Grooms are 2 years more experienced and skilled, and now only earning 66p more per hour than a 21-year-old trainee earning the National Living Wage. Employers are going to have to factor in pay increases for their experienced employees and those with specific skills (for example, an HGV licence), too. As we discuss in our article New Years Resolutions for Equine Employers: How to ensure a strong start to 2024, employees with these specialist skills do expect, and rightly so, to earn more than an entry-level, minimum wage. With the National Living Wage increasing so rapidly, there is a risk of employers losing these skilled employees unless they can maintain the pay gap between them and the entry-level/junior and less experienced, less skilled team members.
What this means for employers
For many employers, finding a minimum of around £262.08 extra per month per employee is going to be tough. With claims that the HMRC is targeting the equestrian industry and issuing hefty fines, all equestrian individuals and businesses that employ staff need to look at their business models and future-proof their businesses.
With the ‘cost of living crisis’, many equestrian businesses are already struggling, and these significant changes to the National Living Wage risk costing jobs. The last significant increase in wages was in April 2020, which the then Prime Minister, Boris Johnson, called “the biggest ever cash boost” to those earning the National Living Wage. A few months later we went into the Covid-19 lockdown and, with so many workers furloughed or made redundant, the increases introduced on the 1st of April 2020 weren’t as directly felt as they are likely to be this year, in 2024.
Photo by NA on Freeimages.com
It is important that workers receive fair pay for their work, and this in turn is going to have to be reflected in other areas of equestrian business, with cost increases being passed on. Unless employers can be creative in affording these salary increases for all their staff, job losses and blows to equestrian businessess are inevitable.
When the National Minimum Wage was first introduced in 1999, there was great speculation that it would cause job losses, as businesses struggled to meet the minimum pay requirements. This is a speculation repeated each time a rise in the National Minimum/Living Wage is discussed. However, in a report prepared for the Low Pay Commission, it is stated that “in the UK there has been no evidence that the minimum wage has had any negative impact on employment (Dolton, Bondibene, & Wadsworth, 2012; Manning, 2012; Metcalf, 2008; Stewart, 2002a, 2004)”. Those of us (both employers and workers) working in the equine industry at the time might beg to differ but, nonetheless, the industry adapted to this change and continued to thrive regardless.
There are no one-size-fits-all answers as to how employers can maintain their business profitability and still meet these pay increases, but employers and employees alike must be mindful that paying the National Minimum and Living Wages are not optional or a guideline – they are a legal requirement. Make sure you’re prepared for the 1st April 2024!
TIPS ON PAY AND THE NATIONAL MINIMUM WAGE
- The gross hourly rate you pay your Grooms isn’t the whole sum of the cost to you. You also have to make employer National Insurance contributions and pay a Workplace Pension for each employee. Using an online payroll program can make it easier to see and account for your whole salary expenditure. FreeAgent, Quickbooks, and Xero are three examples of such programs which can help you plan your staff expenditure and avoid unexpected expenses.
- By law, all employees must be paid by the hour, so if your working day starts at 7 am and ends at 5.30 pm, with an unpaid 30-minute break in the morning and a 1-hour unpaid lunch break, your 5-day working week is 45 hours, and you must pay at least the National Minimum Wage/Living Wage per hour, not a 40 hour week package.
- Many employers are moving to a 5 or 5.5-day week to make their job more appealing to stay in the long term, using Freelance Grooms to cover the shortfall from a 6-day week. We note that one key reason for experienced Grooms coming to us to help them ‘move on’, is to gain a better work-life balance and not having to work 6 days a week. Jobs offering 5/5.5 days a week get filled more quickly. Fact!
- Keep track of your young employee’s birthdays. It can be easy to lose staff or find yourself in trouble with HMRC by not increasing young employee’s hourly rate in line with their increasing age.
- Ensure experienced Grooms are appropriately remunerated as the years pass, and that they have not become senior staff members on an entry-level wage. This is another key reason for good Grooms come to us to help them to find a new job!
