What is the National Living Wage and what will it mean for you?

The National Living Wage is a compulsory premium to be introduced on 1st April 2016 which replaces the National Minimum Wage for employees aged over 25.

It affects all workers aged over 25 aside from those who are self-employed. Workers aged under 25 are unaffected by this change and will still be paid in accordance with the National Minimum Wage.

How much is the National Living Wage?

The National Living Wage will be set at £7.20 per hour for employees over 25 and not in the first year of an apprenticeship. This is 50p higher than the National Minimum Wage, currently set at £6.70 per hour and may be subject to an annual increase.

So what is the difference between the National Living Wage and the National Minimum Wage?

The National Minimum Wage is the minimum pay per hour a member of staff is entitled to by law. This is still applicable for those workers under 25. The current National Minimum Wage rates are:

• 21+ = £6.70 per hour
• 18-20 = £5.30 per hour
• Under 18 = £3.87 per hour
• Apprentice = £3.30 per hour

It is at an employer’s discretion whether they wish to continue to adhere to the National Minimum Wage rates for employees under 25 or whether to wish to adopt the National Living Wage.

It should be noted that the National Living Wage is different from the Living Wage, which is an hourly rate of pay and is calculated based on the cost of living. The Living Wage is paid on a voluntary basis at an employer’s discretion.

What are the consequences of ignoring the National Living Wage after April 1st?

Employers who do not pay workers the National Minimum Wage and the National Living Wage will face tough penalties.

Failure to pay the correct National Living Wage from 1st April 2016 to an employee can lead to serious consequences for employers. It is important that businesses are prepared for, and informed of the change and employees know what they should be paid.

A maximum penalty charge of up to £20,000 for each member of staff underpaid can be given and non-payment will be 200% of the amount owed, unless paid back to the employee within 14 days.

Offending employers also risk being disqualified from being a company director for up to 15 years.

To find out more about the National Living Wage go to: https://www.livingwage.gov.uk/

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