The National Living Wage 2016
From 1 April 2016 there will be an automatic pay rise to £7.20 per hour for anyone over 25 years old who earns less than that rate. This new ‘National Living Wage’ is a minimum pay level that is due to rise each year until 2020, when it is expected to be more than £9 an hour. Those under 25 years of age remain on the old National Minimum Wage levels and there are a few other legal exceptions like volunteers and family workers.
The new wage level of £7.20 is the rabbit that George Osborne pulled out of the hat in the Summer 2015 Budget. He stole Labour’s clothes in that it raises pay for some of the lowest paid workers, who before had been on the National Minimum Wage of £6.70. It also means that employers will bear more of the burden through having to pay workers more, while the State pays less as wage subsidies like tax credits are reduced. Before the last election a rather frank Tory Minister said that employers were going to be kicked into carrying more of the true cost of living of their staff. The reducing of in-work benefits balanced by the National Living Wage aims to achieve exactly that.
Failure to pay at least the National Living Wage can lead to a penalty of 200% of the amount owed unless the arrears are paid within 14 days. The maximum fine for non-payment will be £20,000 per worker. Employers who fail to pay can be banned from being a company director for a severe 15 years. It’s all a considerable risk to run, so wise employers will take any necessary action before April Fool’s Day.
The real Living Wage
The real living wage is set by a charity called the Living Wage Foundation, which has set the current wage needed to live on as £8.25 an hour outside London. Some employers choose to pay the real Living Wage on a voluntary basis. For details see: www.livingwage.org.uk
Frances Barker, Employment Partner.