National Living Wage Update

National Living Wage 

From 1st April 2023 the National Living Wage (NLW) will rise to £10.42 per hour, an increase of 92p or 9.7%. This is the largest increase since its introduction in 2016 and goes a little way towards helping all those low paid workers in such challenging times. Alongside this change there are also increases to the National Minimum Wage (NMW). 

What is the difference between the National Minimum Wage and National Living Wage? 

The National Living Wage is the minimum hourly rate you should pay any employee from the age of 23 and above. There are three further brackets of minimum hourly rates for employees based on age, and all four rates are outlined below. 

Hourly rates from 1st April 2023 

National Living Wage £10.42 

National Minimum Wage 21-22 year old £10.18

National Minimum Wage 18-20 year old £7.49 

National Minimum Wage 16-17 year old £5.28 

My nanny is paid an annual salary rather than hourly wage, does this still apply to me? 

It might, depending on how much your nanny earns and how many hours they work each week. The terms salary and wage actually hold different meanings. Salary is a fixed amount paid at regular intervals to your employee either weekly or monthly. Wages are hourly or daily payments for work done during the work day. Your employee must be remunerated at the minimum of NLW or NMW (depending on age) for the hours they have worked regardless of any contractual salary agreement. If you are unclear, a member of the NannyMatters will be happy to check your nanny’s earnings are compliant with these new rates.

Are there any exceptions? 

There are three scenarios that can be taken into consideration:  

  1. If your nanny lives-in then there is an accommodation offset allowance of £63.70 per week that can be taken into consideration when calculating the average hourly rate.
  2. If your childcare arrangement is more informal and suited to an au-pair then the amount paid is considered more as pocket money and can be lower than the NMW but au-pairs are not expected to carry out the same duties as a qualified nanny.
  3. If your nanny is required to look after the children overnight, only the waking hours count as working hours and often these are rewarded as a lump-sum overnight allowance.

Warning: It is important to recognise that the thrust of the legislation is to ensure that everyone receives at least the minimum wage. Tribunals frown heavily on any attempts to circumnavigate the legislation. In addition, the burden of proof lies with the employer, so to defend a claim, you would need to produce records to show the actual hours worked in relation to amounts paid per the payslip. It is good practice to record actual working hours every week, even if you do not intend to vary the payment. 

How do I calculate the increase required for my nanny? 

NannyMatters clients can request an illustration to show what increase will be required to their nanny’s annual salary but you can also use the NannyMatters Calculator on the website.