Minimum wage increase 2024

by | 26/06/2024 | Pensions

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Rebecca Netten

Rebecca Netten

Head of Corporate Advisory

Rebecca is a qualified financial adviser with almost two decades of experience of providing financial advice. She is responsible for overseeing our team of advisers who provide employee benefits and group personal pensions to our clients.

What is the minimum wage?

The minimum wage is the minimum pay per hour most workers in the Isle of Man are entitled to by law.  The minimum wage rate depends on the individual’s age and education status. The Minimum Wage Act came into effect on the Isle of Man in 2001.

The minimum wage was last increased in April 2023. In May 2024, Tynwald voted to increase the Isle of Man minimum wage, with a review scheduled for April 2025.

 

Increase to the minimum wage 

With effect from 1 July 2024, the ‘interim‘ new minimum wage is:

Over compulsory school age but under 18

£8.75

(an increase from £8.05)

Over the age of 18

£11.45

(an increase from £10.75)

A living wage differs from the minimum wage. It is not a legal requirement and is based on the cost of living. Tynwald has previously resolved to raise the level of the minimum wage to the level of the living wage (currently £13.05 but this is due for review before April 2025).

For further information about minimum wage on the Isle of Man please refer to this website page.

 

What is salary sacrifice?

Salary sacrifice is a way of making pension contributions with pre-approval from the Isle of Man Income Tax Division. Under a salary sacrifice pension agreement, the employer agrees to reduce the employee’s salary by the agreed contribution amount, the employer will then pay that difference into the company pension.

The main advantages of salary sacrifice are:

  • the individual and employer pay lower National Insurance (NI) as the salary is reduced
  • in some cases, the employer can pass on this NI saving to the employee
  • lower tax is paid due to the reduced salary

    For further information about salary sacrifice please, visit the Isle of Man Government website

    Why does a change to the minimium wage impact pensions?

    Employee salary sacrificed pension contributions, which reduces their pay per hour below the minimum wage is not allowable. Due to the upcoming increase in the minimum wage, this may impact some employees and bring their annual income to below the minimum wage threshold.

    Please note, this article does not constitute financial advice. Minimum wage and salary sacrifice is a matter of employment law and so MAC Financial suggests you seek legal advice in relation to this. 

    The contents of this article are correct to the best of our knowledge at the time of publishing, 26 June 2024. 

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