Ready for the National Living Wage?
Julian Hoskins and Nicola Stibbs brief employers on the hidden complexities of the new 'National Living Wage' and set out practical steps to take now.
Not to be confused with the 'living wage' (which is a higher proposed minimum rate of pay, promoted by The Living Wage Foundation), the National Living Wage (NLW) will be a premium, added to the National Minimum Wage (NMW) and paid by reference to NMW rates.
The NMW will remain in force and will continue to be payable. The first NLW premium will be set at 50p, which will bring the total NLW to £7.20.
Recent press headlines have featured the dramatic figure of £9 per hour – but this will only apply following several incremental increases over the next five years, with the expectation that the NLW will rise to around £9, i.e. 60% of median earnings, by 2020.
The NLW will only apply to workers over the age of 25. The NMW will continue to apply to workers under the age of 25.
It has been reported that some large retailers, including Ikea and Lidl, have committed to paying staff more than the NLW and will, instead, adopt the 'living wage', recommended by the Living Wage Foundation.
Currently, HMRC is responsible for enforcing the NMW and they will do the same for the NLW. Similarly to breaches of the NMW, failure to comply with the NLW will attract civil and criminal penalties. Employers who fail to pay the NLW may also risk breaching contracts with commissioners, and expose themselves to serious reputational risk through 'naming and shaming' provisions.
Last month, the government announced a package of measures to strengthen enforcement of the NMW and the NLW, including doubling the penalties for non-payment of the NMW and NLW, from 100% of arrears to 200% of arrears (but halved if paid within 14 days). The overall maximum penalty of £20,000 per worker will remain unchanged.
It is expected the NLW will be introduced from April 2016. The NLW will form part of the remit of the Low Pay Commission, which will make annual rate recommendations (in the same way that it makes recommendations for changes to the NMW). Although the introduction of this change is still some months away, it would be prudent to start taking steps to prepare now.
Please do not hesitate to contact us, or your usual Bevan Brittan contact, if you would like us to advise you on the options for your organisation ahead of the introduction of the NLW, such as:
We can also provide briefing sessions to your HR, payroll and management teams, as well as step-by-step guides for implementing any changes required.
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