What does the national living wage mean for employers?

What does the national living wage mean for employers?

As of April 1st, all employers in the UK will be required to pay their staff aged 25 or over what is more commonly known as the national living wage, which adds a new tier to the minimum wage. It will mean staff being paid an hourly rate of £7.20, but while this will be of huge benefit to employees, what does it mean for companies, and what do they need to know as the change comes into effect?

Budgeting

There’s never been a better, or more vital, time for companies to be looking at their budgets moving forward. The increase in the minimum wage will mean additional costs for some companies, and also there could be an added expenditure of pension auto-enrolment. For these reasons, working out what you can afford as a company is important, as is putting the necessary budgets in place.

If the change in wages and auto-enrolment is going to mean your company will lose out financially, iit may be sensible to look at streamlining ther services and providers you currently use to help with this added cost and look at others.

Discrimination

When you’re dealing with the national living wage, it’s important to be sure that you cannot be accused of discriminating against people of a certain age. Because the new wage of £7.20 only applies to people who are aged 25 or over, there’s a temptation for companies to only employ people who are aged 24 or younger. However, this could leave you open to claims of discrimination, and remember this could mean an added expense for your business in terms of management time and costs.

Employees

Not everyone will know about the changes that are in force from April 1st, so as an employer your starting point would be to discuss it with all of your staff to make sure everyone is informed. It can help to raise morale among those who are about to start earning the higher wage, while those who aren’t will be able to learn why not, meaning they won’t feel left out, or asking questions affecting staff morale.

Penalties

Of course, when anything changes in employment law, it’s important to know what can happen if you don’t comply. For any company that does not pay their staff the new national living wage, there are severe penalties in place. Anyone not complying may be potentially liable for a fine of up to a maximum of £20,000, as well as having to pay any affected staff 100 per cent of the wages they have missed out on. With this in mind, it’s important to get it right, and consult an expert if you have any areas of the new regulations you’re unsure about.

 

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Jane Crosby

Partner, Dispute Resolution

Jane specialises in commercial litigation and employment law acting for both employers and employees in both contentious and non-contentious matters. She has also over recent...

Partner, Dispute Resolution

Jane Crosby

Jane specialises in commercial litigation and employment law acting for both employers and employees in both contentious and non-contentious matters. She has also over recent years carved out something of a niche in the field of mobile homes legislation acting for an owner with a number of sites.

Having studied geography at University College London Jane worked for a number of years in the aviation industry which has given her a real insight into the challenges faced by most businesses. Jane qualified as a Solicitor in 2004 before joining Hart Brown in 2011 and becoming a Partner in July 2018. Not only is Jane our specialist in employment law but she is also a prolific blogger within Hart Brown. You can find many of her articles on the 'News' section of the website.

Jane often receives praise from her clients:

“I appreciated the clarity of advice given at a stressful time”.

“A sensitive and highly professional approach and efficient work in the interests of the client”.

“Your advice, conduct and assistance have been indeed outstanding and very professional but also – and most importantly – very humane”.