National Living Wage Increase

As the new tax year rolls around, one of the changes we’ve come to expect is the increase in the National Living Wage (NLW). The start of the 2021/22 tax year will be no exception, as the NLW for people age 23 and over will increase from £8.72 to £8.91 per hour.

If you’re operating a salary sacrifice (salary exchange) scheme, you’ll need to ensure that this change doesn’t catch you out. As salary sacrifice means an employee is contractually reducing their gross pay, you’ll need to check that employees are still earning £8.91 per hour or more after the deduction of their pension contribution. The calculation for this will depend on your standard contractual hours per week, the earnings basis you use for your pension and the minimum employee contribution.

As an example, a weekly paid employee working a standard 37.5 hour week, with a pension contribution of 5% of Qualifying Earnings, would need to earn £9.22 per hour (£17,979 per annum) to ensure that they were at least 2p per hour over the new NLW from April 2021. 

If your business would like some support in making sure that you get this change right, please get in touch with Angela Ward at Ink via angela.ward@theinkgroup.co.uk.