Are you ready for the new National Living Wage?

Good morning,

We hope you are having a good March so far.

With only a matter of weeks until the new National Living Wage (NLW) rate is introduced, in this edition of our newsletter we look at the steps employers need to take to prepare for the arrival of the new legislation.

As of 1 April 2016 a new NLW of £7.20 per hour for all workers in the UK aged 25 and over will apply. The new rate will supersede the previous National Minimum Wage (NMW) for the age group, although the existing rates for all other age groups will remain unchanged.

Considering the significant jump from the current level of £6.70 (workers aged 21 and over), the NLW received a mixed response from the business community, with many smaller employers claiming they will suffer as a result of the increase.

Practically, there are a number of things for employers to think about in respect of the new NLW.  First and foremost, a review of staff wages needs to be undertaken in order to ensure all staff will be paid at the minimum legal level from 1st April 2016. In addition to workers that fall into the NMW bracket, employers may also need to consider a review of pay rates on a wider scale to account for the narrowing gap between wage rates.

Employers will also need to account for the knock on implications of the NLW such as its effect on pension contributions and employer National Insurance contributions.

Additionally, employers will need to bear in mind that higher wage rates will potentially bring more staff into the fold of auto-enrolment and other staff benefits including statutory maternity/paternity pay.

As part of the legislation that introduces the NLW, a new raft of strict penalties are being introduced for any employers that fail to meet minimum pay levels. As well as being ‘named and shamed’, any employers that fail to comply with NMW and NLW payments will face a fine of 200% of unpaid wages, up to a maximum of £20,000 per worker.

As described above, the new NLW will have many implications for employers. To discuss the finer detail of the legislation further or to obtain advice as to how to implement the changes in your business, please contact either: Pam McColl or Amanda Houlgrave or call us on 0161 312 1864.