National Minimum Wage and the Living Wage

Many of you that have employees will undoubtedly know, this has been a big month of change for those paying the national minimum wages. In fact it’s the largest increase to the national minimum wage since 2007. The changes this month went as follows:-

• Adult aged 21 and over increased by 20 pence to £6.70 per hour
• 18 to 20 year olds increased by 17 pence to £5.30 per hour
• 16 to 17 year olds increased by 8 pence to £3.87 per hour
• The apprentice rate increased by 57 pence to £3.30 per hour


Launching the National Living Wage

The chancellor announced in the summer budget that “Britain needs a pay rise” and decided to introduce “the national living wage”, which is said to effect 2.7 million employees aged over 25. From April 2016, employees falling into this age group will receive a new hourly rate of £7.20, initially a rise of 50p. The government expects the rate to continually increase to £9.00 by 2020.


Why the changes were introduced

With any budget, “what one hand giveth, the other hand taketh away”, the chancellor has also made significant cuts to the welfare system. The clear intention of this first budget was to cut costs and raise taxes, and moving the responsibility of those on low incomes from the welfare system onto employers has been part of this redeploy.

In the media, there has been much speculation as to how this is going to pan out for employers. The largest industries hit are expected to be the care, retail, hospitality and leisure sectors where most minimum wage jobs reside. A number of the big supermarket chains have embraced the new ruling and are offering a “better than minimum wage” deal to all ages of employees, with the belief that employee retention and performance will improve due to offering higher rates.

According to the FSB, it will be smaller businesses working within the restraints of tight margins that are most likely to feel the pressure, forcing them to look at slowing recruitment, price increases and productivity.

As with all change, there are a multitude of concerns and the national living wage with certainty will continue to be debated for the foreseeable future.


Running your own Payroll

In practical terms, for those running your own payroll, it’s important to keep aware of the key dates. For any companies that do not comply with the new regulation, HMRC can fine up to £20,000 per employee. They are also keen to name and shame, which doesn’t just apply to the large companies out there, like the retailer Monsoon but many small businesses have also been caught out.

We work with many small businesses, if you would like advice relating to your own circumstances, please get in touch, we would be happy to discuss the changes with you.

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