The minimum wage / pension increases

Fleur Lewis is a partner at Bishop Fleming Accountants Fleur Lewis is a partner at Bishop Fleming Accountants

The new tax year brings a number of key changes for employers. Two pressing financial adjustments are the new employee rates of pay to comply with the national minimum wage (NMW) regulations and increases in workplace pension contributions.

Employers who pay below the NMW face being fined by the tax office, as well as publicly named and shamed. Since April 2016, the penalties imposed on employers that underpay their employees have doubled from 100% to 200% of arrears owed. The maximum penalty is £20,000 per employee.

The following rates came into force from 6 April 2018:

£7.83 for workers aged 25 and over (the National Living Wage)

£7.38 for 21-24 year olds

£5.90 for 18-20 year olds

£4.20 for 16-17 year olds

£3.70 for apprentices aged under 19 or in the first year of their apprenticeship.

There is also a fair piece rate where employees are paid the minimum wage for every hour they work, based on an hourly rate derived from them working at average speed to produce the work in question.

Minimum pay

In working out whether minimum pay rates are reached, factors such as overtime, tips and regional allowances cannot be taken into account; benefits other than accommodation are also excluded.

Records must be kept – recommended for at least six years - to show the rules have been complied with in case you are ever asked to demonstrate this to the tax office or an employment tribunal. Where levels of pay are significantly above the minimum level, no special records are likely to be necessary.

Employees are allowed to see their own pay records and can complain to the tax office or an employment tribunal if not able to do so.

Pension increases

Workplace pension contributions increased from 6 April 2018. Employers will need to update their payroll software, or contact their payroll provider, to make sure the correct contributions are being made.
The table below shows the minimum contributions to be paid for defined contribution auto enrolment pension schemes, based on earnings of between £5,876 and £45,000 per annum (qualifying earnings).

Date effective

Employer minimum contributions

Employee minimum contribution

Total minimum contribution

Up to 5 April 2018




6.4.2018 to 5.4.2019




6 April 2019 onwards




Bishop Fleming runs its own payroll bureaux and can provide advice on pay and pension issues.

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