From 1 April 2016 the National Living Wage comes into force. All workers aged 25 and over are legally entitled to at least £7.20 per hour.
What is the National Living Wage?
It is a minimum wage premium which has been added to the National Minimum Wage.
The current National Minimum Wage is £6.70. An initial premium of £0.50 is being added to the National Minimum Wage. This premium is called the National Living Wage and all workers aged 25 and over are legally entitled to £7.20 per hour. This rate has been set by the Government. Going forward, the Low Pay Commission will make yearly recommendations on the annual rate, as it does for the National Minimum Wage.
Who is affected?
All employers must pay the minimum wage of £7.20 per hour.
Those entitled to receive it are all employees, workers and agency workers aged 25 and over. The genuinely self-employed are not included.
How will Employers potentially look to fund the National Living Wage?
Employers may decide to increase prices for customers or think of ways to cut costs by making changes to its workforce. Changes such as reducing staff costs including working hours or benefits, might be proposals being considered by employers. Such changes are likely to result in redundancies or the need to make changes to the terms and conditions of employment. If such changes are being considered employers are encouraged to seek expert legal advice straight away, especially if the change is likely to affect more than 20 employees. Getting it wrong can have a significant financial impact on the business. It can also negatively impact upon staff morale.
Employers should not delay in making arrangements to ensure that it can meet the National Living Wage. For those employers ready for the change, don’t forget to write to your workers to confirm the pay increase.