Employment law changes in April 2023

Increases to the UK National Minimum Wage and National Living Wage

The government will implement the Low Pay Commission’s (LPC) recommendations in full and the National Living Wage (NLW) will increase by 9.7% in April 2023 to £10.42. This is consistent with the government’s target of two-thirds of median earnings by 2024.

The LPC has estimated that an increase of 6.3% will be required in 2024 (when average wage growth is expected to have slowed).

The new rates that will come into force on 1 April 2023 are as follows:

• National Living Wage (Age 23 +) - £10.42
• Age 21 - 22 - £10.18
• Age 18 - 20 - £7.49
• Age 16 - 17 - £5.28

The accommodation offset will also rise to £9.10 per day.

This significant increase may mean that businesses that have previously paid little attention to NLW compliance on the assumption that their staff are paid comfortably above NLW levels will now find that more employees are on the cusp of statutory minimums. In practice, this means that more employers may need to pay closer attention to the details of the legal framework. For example, you may want to review contracts and arrangements for lower paid staff to identify areas of risk and areas where your existing practices might not take sufficient account of the NLW framework.

Increases to other employment limits and statutory payments

The limits in relation to unfair dismissal/redundancy pay are increasing as follows:

• England and Wales unfair dismissal/redundancy pay: From 6 April 2023, the limit on a statutory week’s pay will increase to £643 (up from £571). This means that the maximum statutory redundancy payment and unfair dismissal basic award will be £19,290. The cap on the compensatory award for unfair dismissal will increase from £93,878 to £105,707.
• Northern Ireland unfair dismissal/redundancy pay: From 6 April 2023, the limit on a statutory week’s pay will be £669 (up from £594). This means that the maximum statutory redundancy payment and unfair dismissal basic award will rise to £20,070. Meanwhile the cap on the compensatory award for unfair dismissal will increase from £94,063 to £105,915.

The capped weekly pay amount is used in calculating statutory redundancy payments, so the increase is of particular relevance to businesses who are in the process of restructuring their workforce as a result of the challenging economic climate that the UK is currently experiencing. When determining which cap applies in relation to a dismissal, the relevant date is typically, but not always, the date upon which employment effectively ceased. If the employee has accepted an offer of alternative employment and leaves during the trial period, you should look at when the original contract ended.

From early April, other limits and statutory payments will increase as follows:

• Family related benefits: The prescribed or flat rate of statutory maternity, adoption, paternity and shared parental pay will rise from £156.66 to £172.48 per week.
• Statutory sick pay (SSP): SSP will increase from £99.35 to £109.40 per week.

Conclusion

This year we have seen significant increases in several rates and limits, with the increase in the NLW being particularly noteworthy. This reflects the high rate of inflation that we have experienced recently and, assuming that this starts to slow, we may well see increases return to lower levels next year.