What the Minimum Wage Increase Means for Commission-based Contracts

25 March 2024
Reading time
Around 4 min

As time ticks away, our financial superheroes eagerly await questions. The National Minimum Wage (NMW) and the National Living Wage (NLW) in the UK are gearing up for a big increase on April 1.

With the spotlight on financial equality, the NMW and NLW are focused on a new era of fairness. For workers aged 21 and over, this means a pay rise to £11.44 per hour, while 18-20-year-olds will see their pay increase to £8.60 per hour, and the youngest apprentices (under 18) will earn £6.40 per hour. The Real Living Wage is set to rise to £12 per hour across the UK and an impressive jump to £13.15 in the capital.

Now, let's look at what this means for commission-based contracts. In this article, we'll explain how the 2024 minimum wage increase affects these contracts, shedding light on the adjustments needed for both employers and employees who rely on commission. We'll break down the changes, clarify how wages are calculated when commission is involved, and provide guidance on staying compliant.

And our clients don't need to worry, we also shield them from the consequences of non-compliance and guide them in how to address challenges, especially in sectors like hospitality and care, with tools like time tracking software. 

Key Changes in Minimum Wage Rates for 2024

Let's focus on the important changes to the minimum wage rates for 2024 and examine the numbers:

National Living Wage (NLW) for Workers 21 and Over

•     Increasing by 9.8%, the new NLW will be £11.44 per hour.

•     This increase aims to reach two-thirds of median earnings by 2024.

National Minimum Wage (NMW) for Younger Workers

•     18-20-year-olds will see their NMW rise by 14% to £8.60 per hour.

•     16-17-year-olds will experience a 21.2% increase, bringing their NMW to £6.40 per hour.

•     Apprentices will also get a 21.2% raise to £6.40 per hour.

The Accommodation Offset

Going up by 9.8%, the offset will be £9.99.

Now, let's look at what this means for commission-based contracts:

Commission-Only Contracts

The 2024 minimum wage increase means contracts must be adjusted to ensure all staff receive at least the statutory minimum.

Employer's Action

If you manage a team of commission-based workers, it's time to review payment structures. Make sure your payroll reflects the new rates to avoid compliance issues.

Age Considerations

For the first time, the NLW will cover 21 and 22-year-olds, expanding the age range for financial protection.

Remember, these increases reflect overall pay growth, but still fall short of the voluntary 'real' Living Wage set by the Living Wage Foundation. 

How to Stay Compliant and Calculate Wages Correctly

Now, let's assess compliance and how to make sure your commission-based contracts are solid when these increases take effect:

Calculating Wages

Different types of work require different calculations to be compliant. All earnings must be included, but tips and service charges are excluded.

Tracking Time and Earnings

All work hours, including training and travel, must be accounted for. The Living Wage serves as a benchmark for fair pay.

Addressing Underpayment

If your team members suspect underpayment, make sure they have a channel to report it. Seek assistance from our payroll warriors if needed.

By following these steps, you'll ensure your commission-based contracts meet the new minimum wage standards. With us on your side, you'll easily be on the right track to fair pay compliance. Remember, with great power (and pay) comes great responsibility!

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