From 1st April 2016 the government has announced that all employers will have to pay employees the new National Living Wage. This will apply to all businesses with employees over the age of 25 and non-compliance could result in harsh penalties for employers. An employer needs to be aware of the following facts:
The National Living Wage will be compulsory for all employers from April 2016- there will be no exceptions for small businesses. All workers aged 25 or over will have to be paid a minimum of £7.20 per hour and, as with the National Minimum Wage, workers will not be able to waive their rights to this. The intention is that by 2020 wages will increase to £9 per hour making wages equivalent to 60% of median earnings. The National Minimum Wage will still apply to all employees under the age of 25.
How will this affect business?
All employers will have to pay the new wage to all employees aged 25 or over earning under £7.20 per hour. This will equate to an 8% increase for employees currently on the National Minimum Wage, and therefore will be a significant cost for employers. Aside from this employers may feel the pressure from employees already earning the National Living Wage to increase their wages in reflection of their length of service and abilities.
In order to partially counteract additional costs for small businesses due to the National Living Wage from April 2016 the existing employment allowance will increase from £2,000 to £3,000. However this is unlikely to cover the full costs that the National Living Wage will cause and as a result we may see employers trying to hire younger employees which in turn could cause a rise in age discrimination claims.
Currently employers found to be flouting the National Minimum Wage could be named and shamed, fined up to £20,000 per employee and face having to pay employees a back pay of up to 6 years. It is expected that non-compliance with the National Living Wage will result in the same or harsher repercussions.
For more information on the new National Living Wage and for assistance in making sure your business is compliant, contact our Commercial and Employment specialist Umberto Vietri on 01535 613 674 or email email@example.com
Partner and Head of Company and Employment Law