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Goodbye Annual Pay Reviews

Recent Budget changes on pay scales, reviews - and what they mean for employers

The government has announced increases in the minimum wage paid to under-25s, which will see workers aged between 21 and 24 picking up an extra 25p per hour or a 3.7% pay rise.

In a move formally unveiled in the March budget, the rate for the 21-24 age bracket will rise to £6.95 per hour. Those aged 18 to 20 will see the minimum wage grow by 4.7% to £5.55 an hour and for 16-17 year olds it will reach £4 an hour, up 3.4%.


The measures will take effect from October 2016. The announcement comes less than three weeks before the introduction of the new national living wage (NLW) of £7.20 for over-25s. It also results in employers probably having to cope with statutory pay increases in both April and October each year as the NLW increases in April and the national minimum wage (NMW) rates increase in October. Chris Wilkinson from Expert HR Solutions says that most employers will need to check their Contracts of Employment as they often have a clause indicating an annual review of pay in a set month.

The government has also announced a ‘Help to Save’ scheme, which aims to increase the financial security of low earners by offering a top-up if they are able to put money aside. Account holders can then choose to continue saving with the scheme for a further two years and receive another £600 bonus. This will see them earn a savings pot worth up to £3,600 after the full four years of the scheme, including £1,200 from the government. All good news so far, says Chris - but it is entirely possible that the scheme will be administered through the workplace and possibly via a mandatory scheme similar to the Pensions Auto Enrolment scheme. If so this would place a significant extra administrative burden on employers.


The government has also introduced a national mentoring campaign to assist struggling teenagers, which will be managed by The Careers & Enterprise Company. The campaign will focus on careers-related mentoring programmes delivered to young people either individually or in small groups. A fund will launch in June, with funding awarded in the autumn.

If you have any questions on the implications of these announcements contact us via the web for more help.


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