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The latest National Living Wage increase – what does it mean for your business?

In what was Philip Hammond’s first Autumn Statement since he was appointed as Chancellor of the Exchequer by Prime Minister Theresa May, he took the opportunity to announce a new wave of changes to the National Living Wage.

First introduced by his predecessor George Osborne, the National Living Wage (NLW) caters for all working people aged 25 and over. Carrying forward Osborne’s vision to boost NLW to £9 by 2020, Hammond announced this is to rise by 4%, in new plans set to go live on 1st April 2017.

Implemented through the National Minimum Wage (NMW) Regulations, employers must pay their staff that fit this age bracket the new mandatory rate of £7.50 an hour.

NLW represents 55% of median earnings, which the Government has said will increase to 60% ‘subject to sustained economic growth’. It has been estimated that NLW will give approximately 1.3 million workers in the UK an immediate pay rise.

This means that, consequentially, there will also be increases – although not as high – for other NMW rates. Historically, the rates of NMW were reviewed and increased in October each year, but to align any increases with those of NLW, any increases to the NMW will take place in April 2017 and every April annually.

This may seem relatively straightforward on the face of it, but this landmark change has caused some confusion with regard to rules on the minimum rates of pay for workers. As a neutral vendor recruitment outsourcing specialist, de Poel has been working with our client base of 120 high-profile organisations across a range of diverse sectors including logistics, waste management, retail and manufacturing, to provide clarification from an employer perspective.

Understanding the three different sets of terminology now in operation. It doesn’t help that the names are extremely similar; the National Minimum Wage, the National Living Wage and the Living Wage. It is important for employers to understand the difference between them, so they make sure their workers are being paid appropriately.

The National Minimum Wage (NMW) sets various rates of pay for workers dependent on their age, starting for workers who are no longer of compulsory school age (which is generally 16 years old but can also include workers who are 15 years old) up to age of 24, at which point the National Living Wage takes over.

Workers can take their employer to employment tribunal if they are not being paid in line with the National Minimum Wage or the National Living Wage, and employers can also be fined by HM Revenue & Customs (HMRC).

The recently increased Living Wage is not governed by legislation, so therefore does not represent a mandatory statutory minimum. The Living Wage is a campaign that originated in London back in 2002 and soon became a national movement.

Employers can sign up to being a Living Wage employer and gain accreditation from the Living Wage Foundation, for paying a minimum rate to workers that reflects the ‘real cost of living’. This is purely a voluntary arrangement for employers – meaning that workers cannot claim to an employment tribunal that they’re not receiving the Living Wage.

Those employers who signed up to the Living Wage increase in early November of this year will need to implement this by 1st May 2017. The increase takes the current Living Wage for London to £9.75 per hour, with the rate for the rest of the UK set at £8.45 per hour.

To summarise the increases to mandatory, statutory rates of pay:

Initative Increase Date this will take effect:
National Minimum Wage (NMW)

21 to 24 yrs:        £6.95 per hour
18 to 20 yrs:        £5.55 per hour
Under 18 yrs:     £4.00 per hour
Apprentice:        £3.40 per hour

21 to 24 yrs:    £7.05 per hour

18 to 20 yrs:    £5.60 per hour

Under 18 yrs:  £4.05 per hour

Apprentice:     £3.50 per hour

1st April 2017
Historically, the rates of NMW were reviewed and increased in October each year, but to align any increases with those of NLW, any increases to the NMW will take place in April 2017 and every April annually
National Living Wage (NLW)

25 yrs and over:    £7.20 per hour

 

Will increase by 30p to £7.50 per hour

1st April 2017

We understand that the nature of a temporary workforce – and the associated requirements to keep records on all aspects of engagement for given periods of time – places additional record-keeping responsibilities on all hiring managers involved in their supply.

Our innovative and comprehensive software solution, e-tips®, ensures that automation of these processes is embedded as a pre-requisite. Transparent, standardised rates are locked down once they’ve been agreed with our panel of supplying agency partners, allowing our client organisations to predict the cost of a range of scenarios around the future use of workers, while ensuring compliance before hiring decisions are made.

As a truly independent intermediary, we are helping our client organisations to ensure a smooth transition to the new National Living Wage alongside helping them to navigate a raft of other key employment legislation, working closely with our panel of rigorously audited recruitment agencies that supply this talent.

If you would like to find out how de Poel can ensure total legislative compliance and add value to your organisation, please contact us today on info@depoel.co.uk or call 01565 682 020.