How the 2024 minimum wage changes impact hospitality payroll teams
By In late November 2023, the UK Government delivered its seasonal gift to payroll professionals around the country, a significant rise in the minimum wage. And while the annual rise is great news for employees, particularly in sectors like hospitality, for payroll professionals it can trigger a mountain of admin at an already busy time of year.
What was announced?
The 2024 increase marks the largest ever cash increase to the minimum wage, with a 9.8% increase for workers aged 21 and over (known as the National Living Wage) taking the hourly rate to £11.44. This year’s announcement went further by extending the National Living Wage to 21 and 22 year olds, from a previous threshold of 23 and over. The minimum wage for workers aged 16-17 received a 21.2% increase and 18-20 year olds received a 14.8% boost. The Department for Business and Trade estimate 2.7 million workers will directly benefit from the 2024 National Living Wage, an increase of nearly one million from the previously reported numbers. At a time of high inflation and a ‘cost of living crisis’ the increase will no doubt be welcomed by most qualifying workers, although some will argue it still falls short of the real living wage in the UK.
The impact on payroll teams
From the perspective of payroll professionals, the announced changes present a few challenges. As director of a major Payroll bureau in the hospitality sector, a service we offer alongside Fourth’s Workforce and Inventory management platform, I have first-hand experience of where my colleagues in the industry can be caught out. And with the government naming and shaming, and in some cases fining, businesses that do not comply, it really is important to stay on top of paying employees correctly.
Based on my experience, here are a few things that payroll teams should be considering:
Employee record updates
The first order of business is ensuring all employees are on the correct pay rate ahead of the 1 April 2024 effective date. For most payroll teams this should be a relative formality, with their payroll software enabling the changes to be made centrally and rolled out everywhere they apply. That being said, I know of operators in the hospitality sector still relying on largely manual processes, sometimes having to update each and every employee individually. If you currently find yourself in this situation, then your technology is not working hard enough for you. My advice is that it’s time to invest in smarter payroll system. For the hundreds of restaurants, bars and hotels that my bureau supports, I am confident we have the tools and services to make the process pain-free.
Re-evaluate who qualifies
With a significant rise in minimum wage and the change to the age threshold of the National Living wage, it’s not just the employees who are currently on the official minimum wage that you need to consider. There is a chance other employees currently sitting just above minimum wage could be brought into play by the changes, and could easily be missed. It’s important to thoroughly review all employees and ensure the appropriate adjustments are made. At Fourth, we have purpose-built reporting that enables our customers to check each employee’s compliance with minimum wage. The report will flag any employees who fall below the minimum wage at a given point in time (e.g. 1st April 2024) and then, with the click of a button, batch update them to the required pay rate.
It’s not just about hourly rate
It can be easy to overlook that it’s not just the hourly rate that impacts whether hospitality workers are achieving at least the minimum wage. Factors such as uniform expenses, salary sacrifice, and work completed outside scheduled hours can all contribute to the actual wage an employee receives falling below the minimum.
The best solution here is to implement preventative measures that avoid these issues occurring in the first place. Where staff are required to incur expenses to purchase or hire uniforms, ensure there is an appropriate buffer in their pay to accommodate the expense. For salary sacrifice schemes, its important employers apply caps on the deductions allowed to ensure employees wages stay above minimum wage. And finally, implementing a digital time and attendance system, such as Fourth’s eClock, ensures the actual hours worked by each employee is accurately captured, irrespective of what was initially scheduled.
Technology is your friend
In case it was not already obvious, I truly believe the key to mastering minimum wage changes, and payroll legislation updates generally, is about employing the right technology. My bureau processes over 374,000 payslips per month on behalf of hundreds of restaurants, pubs and hotels. If we did not have the Fourth workforce management platform underpinning our work, we would need a veritable army of payroll administrators.
It really should be just ‘a few clicks’ to adopt payroll legislation like changes to the minimum wage. Any complexity of implementing the legislation should be the responsibility of your payroll technology vendor – let them do the heavy lifting! As a payroll professional myself, I am super fortunate to work closely with my awesome colleagues in the Fourth product team to ensure our platform is always ready to support our customers each time new legislation arises. It means my team can be confident, come April 2024, that our customers and their employees will be in great shape to welcome the increases in minimum wage.
Consistent, accurate and straightforward payroll
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