National Living Wage – Don’t get caught short!

04 Apr

1st April 2016 saw the immediate introduction of the National Living Wage.


All workers aged 25 or over who are not in the first year of an apprenticeship, are legally entitled to at least £7.20 per hour. The Government is committed to increasing the amount every year.


It is the employer’s responsibility to ensure that they are paying their staff correctly.  It would be advisable for payroll departments to review current wages and confirm that all wages equate to the correct hourly rate for their age:


Age        25 and over        21 to 24                18 to 20                Under 18              Apprentice

Wage    £7.20                     £6.70                     £5.30                     £3.87                     £3.30


For minimum wage payers the increase equates to 70p per hour for every worker aged 25+. The government have not put any relief plans in place to support employers large or small with the extra wage cost.


Whilst the thought of gradual compliance or non-compliance may appear attractive, The National Living Wage is to be enforced as strictly as the current National Minimum Wage. The penalty for non-compliance is 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. However, employers who fail to pay may be banned from being a company director for up to 15 years.


Various sources have predicted an increase in redundancies and an increase in youth employment as employers try to steady themselves as a result of this extra burden. However, every care must be taken to ensure that as a business, you neither fall foul of this pay regulation, nor the Equality Act 2010.


Age is a protected characteristic under the Equality Act and deliberate measures to recruit those under 25 will open businesses up to the risk of pre-employment claims for age discrimination.


In an effort to offset the increased cost of salaries, Manpower Group have suggested that employers have considered “reducing pay for overtime and bank holidays or to flatten their structures and reduce the number of better-paid supervisory roles”.  

A survey from the Federation of Small Businesses found that just over half (54 per cent) of SMEs believe they will be negatively impacted by the 50p an hour increase in pay, and will put off hiring new staff as a result, while 41 per cent will cut staff hours. Just over a quarter (26 per cent) plan on eroding pay differentials by freezing or cutting the wages of higher-paid staff.

If in doubt, seek advice!


Our team of friendly HR specialists are always on hand to help. Please do not hesitate to call us about this or any other HR query.


Lotus HR

020 8150 9960