Minimum Wage Increases and Furlough: What Happens Now?
At the beginning of March, Chancellor Rishi Sunak unveiled the government's tax and spending plans for the upcoming year, including an extension of the furlough scheme to support the recovery of businesses through the COVID-19 pandemic. With new minimum wage rates introduced on 1st April, many businesses are now wondering what impact the new rates will have on furloughed employees.
New Minimum Wage and National Living Wage Rates Introduced on April 1st
From April 1st 2021, increases to the National Living Wage and National Minimum Wage rates have boosted the wages of over two million employees across the UK.
The National Living Wage rate has risen from £8.72 per hour up to £8.91 per hour and will now apply to workers aged 23 years and over, down from 25 years. By 2024, the government plans that this rate will apply to workers aged 21 and over.
The National Minimum Wage has also increased, and workers aged 21 to 22 will see their hourly rate go from £8.20 to £8.36. Rates for 18 to 20 year olds have increased from £6.45 to £6.56, for 16-17 year olds from £4.55 to £4.62 and the apprentice rate went from £4.15 to £4.30 per hour.
See the table below for a list of the new rates:
What do these changes mean for furloughed staff?
While employees must be paid their new rate from April 1st for hours worked or for hours that have been spent doing work-related training; the furlough rate still stands at 80% of their wages for minimum wage workers, even if this means that their hourly rate will fall below minimum wage. If the furloughed employee spends time doing work-related training while on furlough, the employer is required to top up the furlough pay to meet the minimum wage requirements for these hours.
When claiming furlough for an employee who is on minimum wage or national living wage, it is important to base their furlough pay calculation on the correct rate. The calculation must be based on the rate they received in the reference period associated with when they were first furloughed and not on the new wage rates introduced in April 2021.
These changes can make wage calculations more complex than usual. To help you, BrightPay has a furlough pay calculator in our payroll software which can be used to calculate an employee's furlough pay each pay period, and this includes support for flexible furlough which is something that many other payroll software providers do not support. There is also a CJRS claim report to make it easier for the user when making a claim via HMRC’s online claim portal.
Join us for our free online webinar on Tuesday 20th April at 10.30 am where we will examine how the furlough scheme rules are going to change between now and September and what these changes mean for your business. We will also demonstrate how BrightPay payroll software caters for CJRS and furlough. Book your place now.