In the first budget of the new Conservative only budget in July 2015, George Osborne produced the Rabbit from the Hat. This was his new idea of a “National Living Wage” (NLW) to run alongside national minimum wage (NMW), the aim being to boost the wages of lowest earners. Clearly a ploy to steal some thunder from Labour.
The question is whether this will be all that George would have us believe that it is. It has certainly not been welcomed by everyone and in fact has lots of critics. The new NLW only came into force on 1 April 2016 and only applies to workers over the age of 25. There is a thought that many small businesses will suffer as a result of the increased costs although this may be alleviated once the new business rates come into force in 2017.
A more significant worry may be a trend by businesses to change recruitment policy and look to take on workers under 25. This is anticipated in such sectors as restaurants, pubs and other hospitality concerns along with childcare providers.
Maybe in a few years’ time consumers will be complaining about poor service and more importantly teachers may be complaining about the level of education of children moving into school from nursery a seemingly contradictory situation to George’s insistence that students must continue with Maths and English until age 18?
What is the National Living Wage (NLW)?
The NLW came into force on 1 April 2016 and sets the minimum hourly rate at £7.20 for all workers aged 25 or over. It is intended that NLW should increase to £9.00 per hour by 2020.
Who does it affect?
- All Employers
- All workers over 25 years of age. This does apply to both full and part time workers.
Who is not affected?
All workers under 25 years of age will remain within the national minimum wage rules and rates.
How is NLW different to NMW?
The difference is simply that NLW has started at £0.50 per hour higher than NMW.
What happens if employers don’t comply?
There are penalties for non-compliance although this should be rare and certainly shouldn’t be the case for any employers using payroll bureau services such as provided by Sedulo or specific payroll software which should have updated to cover the changes. The penalty charge has doubled from 100% to 200% of money underpaid/owed. If any employer is found guilty of not applying NLW then the Company Director responsible may find themselves disqualified for up to 15 years.
Finally, if you are having trouble running your payroll or keeping up to date with changes then please do contact us to request a quote for our payroll bureau service.