5 key points about the new National Living Wage
The new National Living Wage comes into effect next month. When Chancellor George Osborne introduced the rise, he stated that it would mean a “direct pay rise” for over 2.5 million low paid workers. This has unsurprisingly attracted a lot of media interest, with many businesses siding with workers and others with fellow employers, with the new wage impacting both. This blog post will give you 5 key points that you need to know before the legislation is enforced, to ensure your business is up to speed.
What is the rate of pay?
The rate of pay is to be increased by 50 pence from £6.70 to £7.20 for workers aged 25 and over. This is set to increase year on year until 2020, at which point the National Living Wage is predicted to be £9.00.
What date does it come into effect?
Legislation affecting employment rights and responsibilities is introduced annually every April. The new National Living Wage for workers aged 25 and over will be introduced for the first pay reference period beginning on or after 1 April 2016.
What is included in National Living Wage calculations?
Certain payments must be included when the new National Living Wage is calculated. These are listed below:
- Income Tax and National Insurance contributions
- Wage advances or loans
- Repayment of wage advances or loans
- Repayment of overpaid wages
- Things the worker paid for that are not needed for the job or paid for voluntarily
- Accommodation provided by an employer above the offset rate (£5.35 a day or £37.45 a week)
- Penalty charges for worker misconduct
What is not included in National Living Wage calculations?Some payments made by workers are not to be included when the National Living Wage is calculated. These are:
- Payments that should not be included for employer own use or benefit
- Things the worker bought for the job and are not refunded for
What are the consequences?
If you discover that you have paid a worker below the new National Living Wage, you may pay any arrears immediately. From 1 April 2016 the penalty for employers that also has to be paid on top of any arrears doubles, so it is important that you ensure you are paying the correct wage. Offenders also risk being named and shamed by the government. Also in addition to this, it is the employer responsibility to keep records showing that they are paying the National Living Wage for at least 3 years. Most employers will keep their payroll records as proof.
Find out further information about the National Living Wage through a series of live webinars from Gov.UK.