From 1 April the Government’s National Living Wage comes into force. This is a new National Minimum Wage for workers 25 and over. If any of your staff are currently paid the NMW then now is the time to get ready and make sure you correctly pay the new rate next month.
Who is entitled to the National Living Wage?
The National Living Wage applies to employees, casual labourers, workers (including agency workers) and agricultural workers aged 25 and above. These workers will be entitled to an hourly rate of £7.20 per hour – a 50p increase from the existing NMW rate.
Other workers will continue to be entitled to the following minimum wage rates:
- apprentices (during first year of apprenticeship) – £3.30 per hour
- under 18 – £3.87 per hour
- 18-20 years old – £5.30 per hour
- 21-25 years old – £6.70 per hour.
So, the NLW is an effective increase in the NMW for workers over the age of 25. All employers are legally obliged to apply the new rate from 1 April 2016.
Full details of the rates, exclusions and other information about the National Minimum Wage are available at the gov.uk site.
When does the new wage rate apply?
Workers will not necessarily get the new wage rate from 1 April: it all depends on the pay reference period. So, a worker who is paid monthly on (say) the 15th of the month will be entitled to the new wage rate from April 15.
The same applies to workers who turn 25: they will be entitled to the National Living Wage rate from the next pay reference period after their birthday.
What happens if the employer doesn’t pay workers correctly?
The cost of not complying is potentially high: employers can be fined up to 200% of the amount owed (if not paid within 14 days) and fined up to £20,000 per worker. Failure to pay the correct rate is a criminal offence and the employer could, in addition to being fined, be named and shamed by HMRC.
Employers could also face discrimination charges if they dismiss an employee (before they reach their 25th birthday) for the primary purpose of avoiding paying the National Living Wage. Similarly, employers could also be in a precarious position if they amend recruitment practices to only employee people below the age of 25.
The National Living Wage is due to be incrementally increased to £9 per hour by 2012.
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