Mary Gavin
From 1st April 2016, all workers aged 25 and over are now legally entitled to at least £7.20 per hour as the new “National Living Wage” came into effect with the implementation of The National Minimum Wage (Amendment) Regulations 2016.
What is the National Living Wage?
Well it’s different to the Living Wage which is a voluntary hourly rate set at £8.25 which employers can choose to pay. It also differs from the National Minimum Wage which will technically remain in place for workers under 25. The new “National Living Wage” will essentially be a compulsory top-up for workers aged 25 and over.
The National Minimum Wage rates pre 1st April 2016 were £6.70 per hour for those aged 21 and over, £5.30 per hour for those aged 18-20, £3.87 per hour for under 18’s and £3.30 per hour for apprentices.
In effect, only those workers in the top band, who are over 25 and earned £6.70 per hour are affected by the new Regulations. These workers are now entitled to the top-up of 50p per hour from the 1st April 2016.
What impact will this have for business?
Concerns have been raised that the new Regulations will be detrimental for businesses. It may very well have an impact on profits, the use of overtime, bonuses, recruitment and potentially consumer prices but, only time will tell. No doubt employees who will benefit from the increase will certainly be pleased with its introduction. Hopefully a positive effect will be increased productivity and job satisfaction.
How can you prepare for the new National Living Wage?
Employers should check you know who is eligible for the new rate in your organisation, amend your payroll system and let your staff know in advance about their new pay rate. It is also a good idea to ensure that all staff under 25 are being paid the appropriate level of wage and that systems are in place to change pay when staff reach an age for the next pay level.
What happens if businesses don’t pay the “National Living Wage”?
As with a breach of the National Minimum Wage Act 1998 (as amended), an employee could make a number of claims to the Industrial Tribunal for failure to pay the National Living Wage including a claim for unlawful deduction of wages or a detriment. Not only that, if an employee is dismissed for a reason related to the National Living Wage they will be able to make a claim for unfair dismissal even if they have less than one year’s service.
Finally if that wasn’t enough to ensure compliance, an employer can face penalties being imposed by HMRC including a requirement to pay any arrears of pay owed to an underpaid employee and a penalty of up to 200% of the arrears owed. Bear in mind there is also the potential for businesses to be named and shamed if held to be in breach of the Regulations.
If you require any further information in relation to the National Living Wage or any other employment related issue please do not hesitate to contact Mary Gavin on 028 90243901 or email mgavin@fhanna.co.uk