Keeping A Lid On Pay For 2022 & NMW Increases

Business owners have much to consider over the coming weeks regarding annual pay reviews for their staff.    They are also having to look at pay scales for those who they hope to recruit into the business as number of things are currently affecting some sectors of the job market:

  • Unemployment is currently very low which gives the job seeker an element of choice in terms of where they want to work.  This makes some businesses react by increasing pay for new starters’ whilst existing staff stay on lower salaries than those joining.
  • We are told that a high percentage of employees are looking to leave their current employer.  The reasons for this are : increasing confidence that they will find it easy to find alternative employment;  low levels of natural turnover over Covid which is now balancing out and employees hoping to find organisations who will offer them better work/life balance.

During 2022 the following factors provide further upward pressure on wage costs:

  • National Living Wage for over-23s will rise from £8.91 to £9.50 an hour.  This is a 6.6% rise and double that of inflation.  Any rise to the NLW will also provide pressure to raise salaries of those near to the NLW.   We are now nearly at £10 an hour for lower paid workers and will be no surprise hit that high during 2023.
  • National Minimum Wage for those aged 21-22 increases to £9.18 an hour
  • National Minimum Wage for 18 to 20-year-olds will be £6.83 an hour
  • National Minimum Wage for under-18 year olds will go up to £4.81 an hour
  • The Apprentice Rate rises to £4.81 an  hour.  Remember that apprentices who are over 19 and have completed their first year go on to the NLW or NMW for their age (as above).
  • National Insurance will rise by 1.5% in 2022 – the following year it will appear on payslips as the ‘Health and Social Care Levy’ (and NI levels will revert to their 2021 rates).  The increase applies to employees as well as business and applies as well to director’s dividend payments.   This money will help pay for the rising costs of social care and the NHS and will be ring-fenced by the government.
  • Some supermarkets are already paying their staff over £10 an hour in an attempt to fill posts; and some employers pay their staff who have experience over £11 per hour.
  • The cost of living has risen by 4.2% to the end of October 2021.

So how can a business respond to this pressure?  Here are some tips:

Firstly, do not panic make adjustments to pay unless the affects of ‘The Great Resignation’ (the idea that employees are looking to change jobs in huge numbers) begins to noticeably affect your business. Not all industry sectors will notice a higher than usual turnover.  Just because employees might be ‘thinking’ of looking for new jobs, it does not mean that they will.

Once you give a pay increase, that level of pay is stays in place.  However a one-off bonus, or a higher than usual bonus; gives the employee recognition for their loyalty but does not commit the employer to increased wage costs for the following year as well.

Think of other ideas to aid staff retention.  This could include undertaking a staff survey to find out why some employees may be thinking of leaving your business.  You might wish to have one-to-one conversations with your key employees to check their commitment to the business and ask if they have any concerns over their career direction with you.

Benefits, flexible working options, development and training opportunities, fair promotion processes, a supportive culture, incentives, social events and other ideas to keep your employees engaged with you as an employer may all help retain your staff.   2022 is the time to put in place a retention plan for your business.