Minimum wage increase: impact on loss of earnings claims

From 1 April 2023 the national minimum wage will increase. This follows the recommendations of the independent Low Pay Commission in 2022 and is set to increase the wages of low-paid workers at a time when many are feeling increased pressure from a rising cost of living. The recommended increase is set against the backdrop of a tight labour market where unemployment is at record lows and vacancies remain high as businesses compete to recruit and retain staff.

Rate Increase

What does this mean for personal injury claims?

The obvious answer is that any increase to the national minimum wage will translate to an increase in value of loss of earnings claims. This rate increase (across all bands) is the largest to the national minimum wage since its introduction in 1999 and will provide a pay increase to millions of low-paid workers across the UK.

Workers currently paid slightly more than the minimum wage may also see their wages increase due to a spill-over effect as a result of employers wanting to keep the wages of their workers differentiated.

The practical implications

Using the following, very basic, example we can see how the increase is likely to effect a claim for loss of earnings:

• £10.42 per hour x 7.5 hours per day x 5 days a week x 52 weeks a year = an annual salary of £20,319
• £9.50 per hour x 7.5 hours per day x 5 days a week x 52 weeks a year = an annual salary of £18,525
• Say our claimant is a 23 year old male, using Table 11 with multiplier of 46.24 the increase from 2022 to 2023 from 1 April 2023 will be £82,954.56, which is not an insignificant amount
• 2022; 46.24 x 18,525 = £856,596
• 2023; 46.24 x 20,319 = £939,550.56

Another area likely to be impacted are claims for care. The NHS Confederation sent a letter to the Prime Minister in June 2022 cautioning that without an increase in pay above the hourly wage, which other sectors have already introduced in response to the cost of living crisis, the social care sector in England would “lose any remaining competitive edge” when it came to attracting staff. A decade ago, the average hourly wage for a care worker was 13p per hour more than those working in the sales and retail sector. However, by 2021, social care workers were being paid around 21p per hour less than those working in supermarkets. The increase in the national minimum wage therefore should be one that will be welcomed by those in the care profession. As a result, care claims are also likely to increase.

Conclusion

The rise in minimum wage is an obvious positive for low-wage workers. For a full-time worker on a minimum wage the increase represents nearly £150 more per month in their pocket.

Just how much a loss of earnings claim increases will be fact specific to each case and dependant on the claimant’s line of work, age and working life expectancy.

Similarly an increase in the cost of care will be dependent on the needs of the claimant. There are ongoing discussions as to whether a minimum wage for care workers is sufficient, with some championing a debate as to whether care workers should also be covered by the Agenda for Change grading and pay scales that already exist in the NHS. We continue to watch for updates in this regard.

In summary, claim costs are continuing to increase – keep an eye on our updates for further details.

For more information contact: Catherine Brewington or Andrew Baines.