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The National Living Wage April 2016
What is it?
The 1st April 2016 sees the introduction of a compulsory National Living Wage. All workers aged 25 and over will be legally entitled to at least £7.20 per hour. The National Minimum Wage will still apply for workers under the age of 25.
The National Living Wage is another increment to the National Minimum Wage and will increase over the next few years to meet the Government’s target of £9.00 per hour by 2020.
As an employer, you will need to know that you are paying your staff correctly as the National Living Wage will be enforced as strongly as the current National Minimum Wage.
The National Living Wage should not be confused with the wage set by the Living Wage Foundation; an advisory amount calculated based on the amount an individual needs to earn in order to cover basic costs of living (currently £8.25 per hour across the UK and £9.40 per hour in London).
What do I need to do?
You will need to identify who is eligible to receive the National Living Wage in your organisation. Once you have taken the relevant payroll action, it is sensible to write to all affected employees to let them know about their new pay rate.
You may also want to think about:
- Updating pension contributions (typically calculated as a proportion of basic pay)
- More people will fall within scope of pension automatic enrolment, maternity pay etc.
- Some employees with childcare vouchers may now be under the minimum/national living wage (salary sacrifice reduces the amount of pay which counts for minimum wage purposes)
- Managing the expectations of other staff who consider they should also be entitled to a pay increase
What happens if I do not do this?
If an organisation fails to pay its applicable staff the National Living Wage, it will be treated in the same way as an organisation which fails to pay the National Minimum Wage. This means that the organisation could find itself having to pay for any arrears plus a penalty (often substantial) for not paying the National Living Wage. They may also be named and shamed. Deliberate failure to pay may also amount to a criminal offence.
For further advice, contact our specialist employment law solicitors on 01392 207020 or e-mail email@example.com.