The
National Living Wage has been catching headlines since Chancellor George
Osborne announced it last summer, but the Government’s target of £9 per hour by
2020 has overshadowed the detail, and many businesses remain unaware of the
transitional deadlines and new penalties now in place.
The compulsory National Living Wage (NLW) arrives on 1 April
2016 for eligible workers aged 25 and over, and it’s been set at £7.20 per
hour. But the NLW does not replace the
current National Minimum Wage, it sits alongside and is a new premium tier solely
for those aged over 25. For everyone
under the age of 25, the National Minimum Wage continues to apply.
The new NLW is
different also from the ‘Living Wage’, which is an hourly rate of pay
calculated to cover the basic cost of living in the UK. It’s assessed by the independent action group
Living Wage Foundation and most recently has been calculated at £8.25 per hour,
or £9.40 per hour in London.
When the NLW
arrives on 1st April 2016 all eligible employees – whether permanent
workers, agency workers, casual labourers or agricultural workers – who are
aged 25 or over must be paid at £7.20 per hour, a pay rise of 50p per hour, whilst
other workers will continue to be entitled to the following
rates:
·
21-25 years old - £6.70 per hour
·
18-20 years old – £5.30 per hour
·
Under 18 years old – £3.87 per hour
·
Apprentices – £3.30 per hour
Said employment
law expert Elissa Thursfield of Gamlins Law:
“Implementing the National Living Wage
for eligible over 25’s is not something that should be ignored or delayed, as
there are stiff penalties in place. Employers
can be fined 200% of the amount owed if arrears are not paid within 14 days and
receive fines of up to £20,000 per worker.”
She added: “It’s
important to avoid any age-related practices that set out to reduce the number
of employees eligible for the higher rate.
Any dismissals of older employees, even with less than two years
service, could see employers facing an employment tribunal for unfair dismissal
and age discrimination. It’s the same
for recruitment, employers must avoid demonstrating any preferences for younger
workers.”
The National
Living Wage is expected to increase each year, with recommendations for future
rises being made by the Low Pay Commission, as the Government continues its
objective towards ‘higher pay and higher productivity’ in place of ‘low wage,
high welfare’.
