Employers are gearing up for the National Living Wage

Posted 21/03/2016 By: Jessica Piper

The National Living Wage has been catching headlines since the Chancellor announced it last summer, along with the assurance that it would reach £9 per hour by 2020. The first stage of delivering that assurance, at a level of £7.20 per hour, comes into force on 1 April 2016, and employers should take action now to ensure that they are prepared to make the necessary changes from that date.

The National Living Wage is essentially a new tier of National Minimum Wage, for workers aged 25 and over, and is currently set at £7.20 per hour. All other bands will remain as set from 1 October 2015. Therefore, from 1 April 2016, the National Minimum Wage bands will be set as follows:

As the National Living Wage is simply a higher rate of National Minimum Wage for those aged 25 and over, it attracts the same criminal liability and penalties for failure to pay as all other tiers of National Minimum Wage. As a result, it is different from the “Living Wage” assessed by the Living Wage Foundation, an independent action group that have most recently calculated the Living Wage at £8.25 per hour (£9.40 per hour in London).

The National Living Wage is expected to increase each year, with recommendations for future rises being made by the Low Pay Commission as the Government trying to ensure that work will pay for individuals.

It is likely that the National Living Wage will cause problems for some employers, particularly small and medium enterprises that are already stretched by rising wage bills and auto-enrolment pension commitments, even though the Chancellor’s Budget last week announced tax savings which should come as a welcome relief for business owners. However, there are stiff penalties for those who do not comply and employers should be wary of making redundancy or recruitment decisions purely based on age and the new rates, as there is a risk that age discrimination claims could follow.

If you require any assistance on the new National Living Wage, or the impact on your business, please do not hesitate to contact a member of the Ashtons Legal Employment Team.