Posted March 8, 2016

Preparing for the National Living Wage

On 1 April 2016 the new National Living Wage of £7.20 an hour for workers aged 25 and over will take effect.

There are several steps employers must take to ensure that they comply with the new rates, including:

Finding out which staff are eligible for the new rate

Updating their payroll before 1 April 2016

Communicating the new rates and changes to staff

Check your staff under 25 are earning at least the right rate of the National Minimum wage.

The Government estimate over 1 million workers will benefit from the increase of 50 pence per hour. The penalty for failing to comply will be 200% of unpaid wages, up to a maximum of £20,000 per underpaid worker.

Implications for Employers

It is not just the basic rate of pay that will increase, there will be a knock on effect on pension contributions, national insurance contributions and more employees being entitled to statutory payments such as maternity and paternity pay as a result of exceeding the earnings threshold.

There is also the effect that the increase will have on higher paid workers in the organisation. The National Living Wage will have to increase by 6-7% per year to meet the Government’s target of £9.00 per hour by 2020.  Currently salaries increase around 2% per year.  Employers may find that as the National Living Wage increases, higher paid staff expect to see proportionate rises in their own salary.

The information contained above is provided for information purposes only and is not intended to amount to advice on which reliance should be placed. We therefore disclaim all liability and responsibility arising from any reliance placed on such information. Professional advice should be obtained before taking or refraining from taking any action as a result of the above contents.