A new law protecting the low-paid is here and 4.5 million Brits are expected to benefit from it. From April 1 2016, all workers aged 25 and over must be paid a new compulsory National Living Wage (NLW) of £7.20 an hour. It will gradually increase to £9 an hour by 2020.
Here are all the facts and figures employers and workers need to know.
• All workers, whether part-time or full-time, aged 25 and over are eligible
Who’s not eligible?
• Those in first year of an apprenticeship
• Self-employed people and volunteers
I am under 25. How much should I get?
The new NLW is for over-25s. The national minimum wage will continue to apply for all workers under 25. Current minimum wage is set at £6.70 if you're 21 or over, £5.30 if you're 18-20 and £3.87 if you're under 18. You can find out the full wage rules on GOV.UK’s National minimum wage page.
What if my employer is not complying with the new NLW rules?
• They will face fines of up to £20,000 per worker
• They could be disqualified from running companies
You should see an increase in your pay automatically from April 2016 if you’re eligible. Check your payslip. However, if you don’t see the difference, you may, in the first instance, verbally complain to your employer. If they fail to act on your compliant, give them a written complaint. If things don’t get any better, call the government’s free and confidential Pay and Work Rights Helpline on 0800 917 2368. If you are a Union member you can contact a Trades Union Congress for advice and legal support. You can also approach the Citizens Bureau for support.
FOR EMPLOYERS/SMALL BUSINESSES
All workers aged 25 and over are entitled to at least £7.20 per hour.
Do small businesses really need to comply?
Yes, all businesses, irrespective of size, have to comply.
What if I don’t pay?
Failure for non-payment of the NLW can result in penalties of up to £20,000 per worker. If found guilty, you could be named and shamed, and also disqualified as a company director for up to 15 years.
Who do I go for payroll help?
If you don’t have HR or payroll support in-house, speak to your accountant or payroll bureau.
How to plan
If you haven't yet planned for the new NLW, now's the time to do it. We would suggest the following basic steps:
- Find out who's eligible. Check GOV. UK's employment status page
- Assess staff payroll - who is affected? Take appropriate action
- Inform your staff know about their new pay rate
- Ensure staff under 25 are earning at least the right rate of National Minimum Wage. That's 6.70 if you're 21 or over, £5.30 if you're 18-20 and £3.87 if you're under 18. You can find out the full wage rules on GOV.UK's National minimum wage page
How to offset costs
- Improve staff performance - this may help to offset any increased cost
- Ensure you hire the right people - is your recruitment strategy well suited for the designated role?
- Check if some of your staff could some work part time? Make optimum use of the resource.
The new NLW has the potential to cause problems for small businesses. Perhaps the most appropriate response is to plan your finances and figure out how to absorb these costs. This is especially important considering the other changes to employment law that are being rolled out over the next few months, such as auto-enrolment pensions and the changes coming to holiday pay, overtime and commission.
If you don’t have HR or payroll support, our advice would be to keep an eye on the news as these changes could have a huge impact on your small business.