At Consensus HR, we are busy helping clients prepare for the forthcoming introduction of the ‘The National Living Wage’. It will affect a great deal of employers although many seem unaware of the impact it will have from 1st April 2016.
What is the National Living Wage?
Employees will be legally entitled to at least £7.20 per hour if they meet these all three requirements. They must be:
- Aged25 or over
- Not in the first year of an apprenticeship
That’s an extra fifty pence per hour in their pocket. The Government is committed to increasing this every year. By 2020 it will be more than £9 per hour or 60% of UK median earnings, (if this is higher than £9 at that date).
What does it mean for business owners?
Employers need to make sure they are paying their staff correctly from 1st April 2016. The National Living Wage will be enforced as strongly as the current Minimum Wage.
Take these three steps to be ready for the change:
- Take the appropriate payroll action.
- Let your staff know about their new pay rate.
- Check all staff aged less than 25 years are earning at least the right rate of National Minimum Wage.
What happens if an employee is aged less than 25 years?
The change won’t affect people aged 24 and under currently on the minimum wage.
- At the moment, the national minimum wage is £6.70 and applies to everyone aged 21 and over.
- 18-20 year olds’ current rate – £5.30 per hour.
- Under 18 year olds – £3.87 per hour.
Around 1,600 employers have already voluntarily chosen to pay a Living Wage – you can find out who they are here.
How will the National Living Wage be paid for?
George Osborne has said that businesses will be helped to make the changes to wages.
Firstly, corporation tax is being cut by two per cent to 18 per cent by 2020.
Plus employers will be able to reduce the amount of National Insurance contributions (NICs) they pay for their employees by 50% up to £3,000.
Isn’t there already a Living Wage?
Yes, but it’s up to employers to decide if they want to pay it or not and should not be confused with the National Living Wage as discussed above which is compulsory.
The current Living Wage for London is £9.15 an hour, lower than what the Government says its National Living Wage will be by 2020.
Elsewhere the rate is £7.85 an hour, more than what has been proposed in the Budget.