Countdown to the National Living Wage

The National Living Wage (NLW) is due to come into force on 1 April 2016. It is a mandatory premium which must be paid in addition to the National Minimum Wage. This will have the effect of increasing the minimum pay for all workers over the age of 25. Workers under this age will not be affected.

The changes are being introduced by the National Minimum Wage (Amendment) Regulations 2016 and the current National Minimum Wage will increase by 50p from £6.50 to £7.20 per hour.

The penalties for employers failing to comply are serious: 200% of unpaid wages or £20,000 per worker.

Employment is a fast moving and often changing area of the law and the introduction of the NLW is another example of the many practical and regulatory changes that employers must grapple with on a regular basis.

Employers must be ready to introduce these changes. It must be remembered that the changes do not simply mean that the wage bill will go up each month. The required increases will impact on pension contributions and more workers may need to be auto enrolled into a pension scheme due to their higher wages.

It is worth considering that higher wages at the bottom of a pay scale in an organisation may have the knock on effect of raising the salary expectations of those higher up the income scale. Employers will need to consider how these increases are going to be paid for, as well as the practical implications for the pay roll department.

Employers may need legal advice to ensure that they do not fall foul of the Regulations. However, a review of what payments are being made already may mean that the impact is not as great as some may fear. For example, if an employer takes account of payments relating to bonus, commission and piecework, they may find that they are already paying above the NLW.

To discuss this and any other employment related issue, contact us.