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East Midlands Chamber News

Two million workers get rise and pensions costs go up

Over two million workers on minimum wages got a pay rise last weekend and employers have to pay more towards workers' pensions from this weekend.

The National Living Wage for over-25s increased by 4.4% from £7.50 to £7.83 on Sunday (1 April).

The National Minimum Wage for workers aged 21-24 increased by nearly 4.7% from £7.05 to £7.38.

Almost 400,000 young workers are expected to benefit from the fastest increases in the National Minimum Wage in more than ten years.

From 1 April 2018 the rates for:
workers aged 25 and over will be £7.83 per hour
workers aged 21 to 24 will be £7.38 per hour
workers aged 18 to 20 will be £5.90 per hour
workers aged under 18 will be £4.20 per hour
apprentices under 19 or in the first year of their apprenticeship will be £3.70 per hour.

Employers who underpay minimum wage rates can face fines of up to 200% of the back pay they owe to workers and can be publicly named by the Department for Business, Energy and Industrial Strategy.

Since 2013 the naming scheme has identified more than £9m in back pay for around 67,000 workers, with more than 1,700 employers fined a total of £6.3m.

Since 2015, the Government has doubled investment in minimum wage enforcement, spending £25.3m in 2017 to 2018. The increase followed the Government’s publication of its Good Work plan in February, which announced the right to a payslip for all workers.

The new law is likely to benefit around 300,000 people who do not currently get a payslip.

For those paid by the hour, payslips will also have to include how many hours the worker is paid for, making pay easier to understand and challenge if it is wrong.

Employers' pensions contributions have also increased with the start of the new financial year.

For the past 12 months, employers have had to pay one per cent of the auto-enrolment pensions contribution with staff paying two per cent.

From Friday (6 April) and for the next 12 months, the employers' contribution doubles to two per cent and the staff contribution increases by half to three per cent.

From 6 April 2019, the employers' contributions increases again to three per cent and the employees' contribution rises to five per cent, making the overall contribution eight per cent of salary.

Both the employer and staff member can choose to contribute greater amounts to the pension if they wish.

If the employer contributes more than their required minimum amount - but less than the total minimum amount - then the staff member only needs to make up the shortfall between the total minimum and the employer contribution.

Information from the Pensions Regulator is available here.