National Living Wage
With the National Living Wage coming into effect shortly it is becoming apparent how some employers and employees are unsure as to what this is, mainly due to the Living Wage which has been in play for some time now. Thus essential for employers and employees to be aware of the differences and which wage they shall receive.
The Living Wage Foundation commenced some time ago to allow employers to pay their employees the ‘Living Wage’ on a voluntarily basis. The Living Wage has continually been higher than National Minimum Wage rates since it commenced, although the reason behind this is because the Living Wage takes into consideration individuals cost of living, in respect of where they live in the UK. Thus a voluntary hourly rate is set independently for the Living Wage, however is updated annually (similar to the National Minimum Wage). Although, overall, the main elements concerning the Living Wage is how employers have a choice to pay the Living Wage, and that the Living Wage is determined through peoples costs of living.
However the National Living Wage is entirely different from the Living Wage because this will be a mandatory pay scheme for employers to implement and adhere to. From 1st April 2016, the National Living Wage, which is currently set to be £7.20 per hour, will be the minimum rate of pay which employers must pay their employees who are aged 25 or over. Meaning the National Minimum Wage rates will still be appropriate and payable to all employees who are under 25 years old. Whilst this National Living Wage has come as quite a shock to both employees and employers it has generally been a welcomed decision, which may relate to Living Wage employers voicing the benefits of paying individuals a wage which they live on.
It is important to note that employers who fall foul of not paying the National Living Wage, even if this is due to their misunderstanding of this to be voluntary, it will be unlikely to make a satisfactory defence. Thus vital to ensure your rates of pay comply with the National Living Wage in any event, as the National Living Wage and the Living Wage will co-exist. In addition, the penalty for employers who are found to not have paid the National Minimum Wage will double from 1st April 2016 and this enforcement regime will apply in the same way for employers who are found to not have paid the National Living Wage.