From 1 April 2016, all employers will be required to pay the National Living Wage to all employees aged 25 and over.
This means that the minimum wage for employees aged 25 and over will rise by 50p from £6.70 to £7.20.
The current minimum wage will continue to apply for those under the age of 25:
- Age 21- 24- £6.70 per hour
- Age 18 – 20- £5.30 per hour
- Age 16 – 17- £3.87 per hour
- Apprentices under the age of 19 (or 19 and over in the first year of their apprenticeships)- £3.30
The rationale behind this increase is to help individuals and families afford a decent standard of living. This includes being able to pay for food, transport and bills. Many organisations, most notably the Living Wage Foundation, have been campaigning for employees to pay more than the minimum wage for a number of years.
Their research has found that employees working full time, earning the minimum wage, are struggling to make ends meet due to the high cost of living.
The Government’s National Living Wage must not be confused with the Living Wage, which is set by the Living Wage Foundation. The Living Wage Foundation has calculated that the current UK living wage should in fact be £8.25 per hour (or £9.40 per hour for those who live in London), which some organisations already adhere by, even though it is not compulsory. The Government have not proposed to go this far (just yet) but plan to increase the national living wage by 6% year on year to total £9.00 per hour by 2020.
This rise has understandably caused great concern to businesses large and small, as the increase will cost an employer an additional £910 per year for every full time employee on the minimum wage. Employers have already been encouraged to budget for pension auto enrolment and holiday pay changes. There will be a reduction in national insurance contributions which will assist small businesses but as the minimum wage applies to all workers, (excluding the self employed, volunteers and company directors), employers will need to take urgent steps now to minimise the impact the increase will have on their businesses.
Good financial planning is key
Once you have checked how many of your employees the new ruling will effect, you need to assess the full financial impact this will have on your business. You will need to take extra care to ensure that you take into account employees who will turn 25 in the coming months. Now is also a good time to check that all of your employees are on the correct hourly rate, as the minimum wage regulations will continue to be strictly enforced by HMRC.
How can we help your Business adapt to the new National Living Wage Regulations?
- Improve Performance and Productivity- Happy staff work harder
Hold regular reviews and meetings with your employees to identify any problems at the earliest stage. Our team of experienced HR advisors can provide you with bespoke advice and training on how to get the best out of your managers and employees, increasing performance, productivity and morale.
Regular reviews will also help you address poor performance. We can draft you a bespoke staff handbook which clearly sets out your expectations and company policies. If performance is becoming a concern, our employment solicitors can provide you with guidance on performance management, disciplinary procedures and dismissals.
- Manage Sickness and Absences Proactively
A robust absence and sickness policy, correctly implemented, can drastically reduce sickness in the work place. We will work with your company to draft and enforce a personalised absence policy that will empower you to deal with absences at an early stage and before absences start to affect your profits.
- Consider restructuring and/or redundancies
Whilst never desirable, restructures and redundancies can sometimes be necessary to streamline work processes, maximise individual productivity and reduce the payroll. We can take the stress out of this process by providing specialised advice on how to implement a redundancy or restructure procedure. If you would prefer a more hands on approach, we can take over the process and manage your redundancy or restructure from start to finish, giving you total peace of mind that all stages have been handled correctly and professionally.
- Fully protect your business with a Watertight HR Plan
Our Watertight HR plan provides you with complete HR support, and the reassurance that comes from having an unbeatable team of employment experts in your corner. Watertight HR frees you up to get on with running your Business, safe in the knowledge that all your HR needs are being met.
As a member of our Watertight scheme, we will ensure that your employment documents are up to date and legally compliant. We will draft you tailored contracts of employment and a comprehensive staff handbook. We will also draft letters for you to send to your employees at no additional cost.
We provide unlimited advice by telephone, email or face to face meetings. You can also opt in to benefit from Insurance protection to assist with the costs of defending yourself against any claim.
Finally there will be no unexpected bills as we offer a range of payment options including fixed monthly fees for ease of budgeting.
For more information on the National Living Wage or for advice on any aspect of Employment Law and HR visit our Advice for Business page or contact us on 0114 303 2300 or email firstname.lastname@example.org.