A new law protecting the low-paid is here and 4.5 million Brits are expected to benefit from it. From April 1 2016, all workers aged 25 and over must be paid a new compulsory National Living Wage (NLW) of £7.20 an hour. It will gradually increase to £9 an hour by 2020.
Here are all the facts and figures employers and workers need to know.
For workers
Who’s eligible?
All workers, whether part-time or full-time, aged 25 and over are eligible
Who’s not eligible?
- Those in first year of an apprenticeship
- Self-employed people and volunteers
- They will face fines of up to £20,000 per worker
- They could be disqualified from running companies
For employees/small business
Who’s eligible?
All workers aged 25 and over are entitled to at least £7.20 per hour.
Do small businesses really need to comply?
Yes, all businesses, irrespective of size, have to comply.
What if I don’t pay?
Failure for non-payment of the NLW can result in penalties of up to £20,000 per worker. If found guilty, you could be named and shamed, and also disqualified as a company director for up to 15 years.
Who do I go for payroll help?
If you don’t have HR or payroll support in-house, speak to your accountant or payroll bureau.
How to plan
If you haven’t yet planned for the new NLW, now’s the time to do it. We would suggest the following basic steps:
- Find out who’s eligible. Check GOV. UK’s employment status page
- Assess staff payroll – who is affected? Take appropriate action
- Inform your staff know about their new pay rate
- Ensure staff under 25 are earning at least the right rate of National Minimum Wage. That’s 6.70 if you’re 21 or over, £5.30 if you’re 18-20 and £3.87 if you’re under 18. You can find out the full wage rules on GOV.UK’s National minimum wage page
Final thoughts
The new NLW has the potential to cause problems for small businesses. Perhaps the most appropriate response is to plan your finances and figure out how to absorb these costs. This is especially important considering the other changes to employment law that are being rolled out over the next few months, such as auto-enrolment pensions and the changes coming to holiday pay, overtime and commission.
If you don’t have HR or payroll support, our advice would be to keep an eye on the news as these changes could have a huge impact on your small business.
