Are you ready for the National Living Wage increase?

Up to now, paying the National Living Wage (NLW) was a recognised sign of good practice, with news that Lidl and Morrison were going to pay the Living Wage arriving with great fanfare from last October. Come April this year however, the duty to pay the National Living Wage to all employees and workers aged 25 and over becomes law. In essence what the government has done is introduce an additional tier to the National Minimum Wage (NMW).

What do you need to be doing now?

Your business can take the following steps to prepare itself for the introduction of the NLW:

• Check you know who is eligible in your organisation - who in your employment will be 25 years or older from April this year?
• Put in place measures to notify your payroll when staff turn 25 to ensure they receive the NLW
• Let your staff know about the new pay rate and ensure that those staff who will not be receiving the publicised NLW rate of £7.20 per hour understand why, given the sometimes confusing reporting that has gone on about the Living Wage in the press in the last year.  Remember the National Living Wage and the Living Wage Foundation recommended rates are not the same.
• Check your workers and employees under 25 are also earning the National Minimum Wage.  For the 2015/2016 tax year the NMW rates are:
  • Workers aged 21yrs - 24yrs: £6.70 per hour
  • Workers aged 18-20yrs : £5.30 per hour
  • Workers aged under 18yrs: £3.87 per hour
  • Apprentice workers rate: £3.30 per hour.

You may also wish to follow in Aldi’s steps by paying all your staff a rate above the NLW. From this month Aldi will pay all UK staff £8.40 per hour, regardless of age. For admin purposes, and to avoid any unintentional claims, as well as for good publicity, you may also wish to consider paying all employees and workers over 18 the National Living Wage. You could even go one step further and pay all employees and workers the Living Wage Foundation rates which are currently set at £9.40 for London and £8.25 outside London.  Your Finance Director may want to know before you make this announcement however.

Don’t forget that you may already be paying many of your staff the NLW. In calculating whether you are paying the correct wage the following elements of pay count towards the NMW: Bonus, commission and other incentive payments based on performance (but not any shift premium), piecework payments, accommodation allowances and allowances paid by way of HM Revenue & Customs dispensation agreements.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.