National Living Wage - Everything You Need To Know

 

The National Living Wage Comes Into Effect From 1st April 2016

Next month sees a significant change that will affect all businesses throughout the UK - the introduction of the new “National Living Wage”. Announced last summer in George Osbourne’s budget, it is set at £7.20 per hour for those over the age of 25, this comes in to effect as from April 2016 and will run in conjunction with the “National Minimum Wage” which will continue to apply for those aged 21 to 24; creating a two tier welfare and wage structure.

Below is a table showing you all the new pay brackets which come into effect as of 1st April 2016 based on the introduction of the National Living Wage:

 

Category

Age Banding

Rate per Hour

National Living Wage

Aged 25 and over

£7.20

National Minimum Wage

Aged 21 to 24

£6.70

National Minimum Wage

Aged 18 to 20

£5.30

Apprentices

Aged 16 to 18 and those aged 19 in the first year of their apprenticeship

£3.30

 

Why is the NLW being introduced? 

The purpose of introducing this new living wage is to support the government’s vision of a “higher wage, lower welfare, lower tax society” and it is anticipated that over a million workers in the UK aged 25 and over are set to directly benefit from the increase; some workers will see their pay packets rise by up to £900.00 a year. This creates the largest annual increase in a minimum wage rate across any G7 country since 2009 in cash and real terms. However, whilst this is a positive gain for the worker, the new living wage will have a significant impact on many businesses, especially on profitability and hiring, not only for this year but for the next few years ahead as the National Living Wage is set to increase each year with the rate expected to rise to £9.00 per hour by 2020.

With the introduction of the National Living Wage, a two tier welfare and wage system has been formed which could potentially raise issues. Firstly, while there will continue to be an annual increase to the National Minimum Wage for workers under the age of 25, it is likely that between 2016 and 2020 a significant gap in pay may develop between workers aged 25 and over and those under the age of 25, even though they carry out the same job. Many people will be asking if having this two tier wage system will be fair and if this could be classed as age discrimination. For the avoidance of doubt and to clarify and in accordance with the Equality Act 2010 - which protects workers from discrimination, harassment and victimisation - there is a specific exemption to the usual rules on age discrimination in relation to payments in keeping with the National Minimum Wage. This allows employers to lawfully base their pay structures for young workers on the National Minimum Wage bands and pay workers different rates.

 

Changes To The National Minimum Wage in October 2016

In addition to the introduction of the National Living Wage last week saw the Low Pay Commission present its Spring 2016 report whereby they have recommended that the hourly rate of National Minimum Wage be increased from £6.70 to £6.95. Based on this the Government have since agreed to the proposals and therefore please see below all the new rates regarding the National Minimum Wage which come into effect as from 1st October 2016.

Category

Current NMW rate per hour

NMW rate per hour from October 2016

Increase of

Aged 21 – 24

£6.70

£6.95

25p an hour

Aged 18 – 20

£5.30

£5.55

25p an hour

Aged 16 – 17

£3.87

£4.00

13p an hour

Apprentices

£3.30

£3.40

10p an hour

 

To Stay In The EU or Not to Stay in the EU???

The UK will go to the polls on 23rd June 2016 for a Referendum on whether Britain should remain in the European Union. There will be a lot of debate about potential implications of a vote either way but what is it likely to mean from an employment law point of view, bearing in mind the recent outcome following the Lock V British Gas case regarding holiday pay and commission.

The assumption is that whilst leaving the EU would mean that a UK Government would have freedom to ignore the legislation previously imposed upon it there would not be wholesale overnight changes. We would probably not see the repeal of the Equality Act 2010 immediately for example.

 It is thought that much “European Legislation” might be weakened and diluted over time particularly in relation to the Working Time Regulations, Agency Workers Regulations and TUPE.

As always it is down to the people to decide and like most things the devil will be in the detail and as soon as we are aware of the ramifications of the EU Referendum we shall inform you accordingly.

 

Current Rates & Limits

Every April, the rates and limits are assessed for matters such as Redundancy pay, Statutory Maternity pay, Statutory Sick pay etc.

The main rates to be aware of as from April 2016 are as follows:

A week’s redundancy pay is expected to increase from £475 to £479 per week

Statutory Maternity Pay is remaining at £139.58 per week

Statutory Sick Pay is remaining at £88.45 per week.

 

 

Posted: Wed 23 Mar 2016
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