On 1st April, six million workers across the UK will benefit from an increase in the National Living Wage. Employers will have to pay employees a minimum hourly rate of £7.20 which equates to a 50p increase on the current minimum level of pay for employees over 25 years old. An employee who is over 25 and currently working a 35 hour week on the minimum wage will see an increase of £910 in their annual pay packet.
Businesses Should Embrace the New Legislation
Our employment law team urges businesses to ‘embrace’ the new legislation.
“The benefits of more spending power to the economy as a whole are obvious, with an estimated £4 million wage boost. Employees on the minimum wage will see their earnings rise by more than 7%. With inflation maintaining an even 0%, this is significant improvement for those families who are stuck in the “working poverty trap.”
What is less obvious are the benefits illustrated in recent studies to businesses who have voluntarily adopted the Living Wage (not to be confused with the lower compulsory National Living Wage). An independent study of London businesses in 2015 found additional benefits for most business who have adopted the Living Wage including:
• Higher productivity
• A 25% reduction in absenteeism
• An increase in the volume of good candidates for recruitment
• An increase in consumer awareness of their organisation’s commitment to be an ethical employer (according to 70% of employers) and a resultant positive affect on sales
• An increase in staff loyalty
Failure to Comply Will Cost Businesses
Whether employer’s think it’s a good idea or not, as of 1st April there are penalties for failure to comply with the new legislation. The penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days, and a maximum fine for non-payment of £20,000 per worker. Clearly it is intended as an economical incentive to ensure compliance. Moreover, employers who fail to pay the National Living Wage may be banned from being a company director for up to 15 years.
However, many organisations are yet to take necessary and important steps to ensure they are prepared for this new legislation. A recent survey found only 45% of businesses had updated payroll to take account of staff aged 25 and over from 1st April 2016 and just 39% had communicated the upcoming changes to staff.
If you require assistance understanding and implementing the changes to National Living Wage please contact our expert Employment Team, call 0808 178 2773.
