Everyone is talking about the National Living Wage

It has now been announced that the National Living Wage will become effective as of 1 April 2016. This means that all employers will be under an obligation to pay employees over age 25 the National Living Wage which is an enhanced rate above current National Minimum Wage rates. From 1 April 2016, employers will therefore be bound to pay the following hourly rates:

• Age 25+ – £7.20ph (the National Living Wage)
• 21-25 – £6.70ph
• 18-21 – £5.30ph
• Under 18 – £3.87ph
• Apprentices – £3.30ph

This is welcome news for lower earners however the pressures which the Living Wage will have on employers are going to be significant with employers having to apply even more careful management to employment related obligations. The pressure is expected to be significant because not only will the Living Wage affect basic salary but it will also have to be taken into account when paying holiday pay and making pension contributions, for example. Overtime rates will also increase accordingly and is possible that employers will want to reduce the amount of employees who are aged 25 or over. The Living Wage is anticipated to be a hotly debated topic over the coming weeks and as the below examples show, the issue of pay rates is already in the spotlight.
More national minimum wage offenders to be named and shamed
The government are still very keen to ‘name and shame’ those employers who fail to pay the minimum pay rates. Following last year’s shock announcement that Monsoon Accessorize had not been paying their employees in accordance with minimum rates, the overall profile of ‘naming and shaming’ is expected to increase. The government is currently considering the next batch of cases and expects to name more employers shortly.
Since October 2013, a total of 1004 investigations have been carried out and this week the government confirmed the following: 165 of those employers were exempt from the name and shame scheme on the basis that their total arrears were less than £100 and 27 employers made successful representations under the scheme and have not been named. 414 employers who were issued underpayment notices were not exempt from the scheme, did not make successful representations and have not been named under the scheme.
Jeremy Corbyn proposes barring companies from distributing dividends unless they pay the living wage
On 16 January 2015, Jeremy Corbyn proposed barring companies from distributing dividends unless they pay the living wage. He also proposed putting in place salary curbs to stop bosses receiving salaries that were disproportionate to those workers. The proposals has received fierce opposition from company bosses who have said that for one, the proposal would be unworkable as a failure to pay dividends would simply increase the value of company shares thus resulted in the same individuals profiting.
As the implementation date gets closer we shall keep you updated and abreast of any developments or news stories accordingly. If in the meantime, you would like any further advice on the matter of the Living Wage and how this might affect you please contact us on 01274 864999.