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National Minimum Wage Update

National Minimum Wage Update

02/10/2015

National Minimum Wage

We remind you of the new National Minimum Wage rate, which take effect from 1st October 2015:

 

New Rate

Workers aged 21 and over
 

£6.70

Workers aged between 18 and 20
 

£5.30

Training Rate
 

£5.30

Workers aged between 16 and 17
 

£3.87

Apprentices
 

£3.30

Daily accommodation offset
 

£5.35

 

 

Time to prepare the National Living Wage

With effect from April 2016, workers aged 25 and over will be entitled to receive the National Living Wage (NLW), which is a premium added to the National Minimum Wage (NMW).  In other-words, it will be a “top up” over and above the NMW.   (There will no doubt be an explanation as to why they could not simply increase the NMW but let’s not worry about that for now!)

Don’t get confused either, the NLW is different from the Living Wage set by the Living Wage Foundation, which promotes a voluntary minimum hourly rate of pay calculated according to the basic cost of living.

What will the NLW be?

Initially, it will be £7.20 per hour (a premium of 50p on top of the NMW which is now £6.70 per hour).  

The target is for the NLW to reach more than £9 per hour by 2020 but we do not know the level of NLW incremental increases to achieve the target set for 2020.  Like the NMW, it is the Low Pay Commission that will make recommendations for the NLW each year, which is likely to change every April. (Again, not sure why the change could not be in October when the NMW increases take effect).

How can employers prepare for April 2016?

If employees’ aged 25 and over are not already being paid at the NLW rate of £7.20 per hour, employers may want to consider the financial implications of the increased wage and start budgeting accordingly.  If the increased staff costs are not sustainable, you may find yourself in a need to restructure the business but be wary of using age (directly or indirectly) as a basis for selecting an employee for redundancy – possible age discrimination.  If you do need assistance with restructuring/redundancy, please seek detailed advice from Sentient on the process with a view to minimising the risk of costly litigation.

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