What is the National Living Wage & What Does it Mean for Employers?

Date: Thursday, 9th January, 2020

A new National Living Wage will be introduced this year, coming into effect from 1 April 2020 and will see low-paid workers earn nearly a thousand pounds more a year. 

Rebranded from the Minimum Wage in 2016, the policy has helped to cut the number of people officially defined as being on low pay – those who earn less than 60% of the average – reducing income inequality.

The new rate of pay for those currently on the legal minimum wage will see a rise from £8.21 to £8.72 for workers over the age of 25, marking an increase of 6.2%.

This means a full-time worker aged 25 or over who receives the National Living Wage will get a pay rise of £930. The raise will also see younger workers receive a boost to the national minimum wage of between 4.6% and 6.5% depending on their age, with 21-24 year-olds seeing a 6.5% increase from £7.70 to £8.20 an hour.

The Pay Rises in Full

The National Living Wage (for over 25-year-olds) will increase 6.2% from £8.21 to £8.72.

The National Minimum Wage will rise across all age groups, including:

  • A 6.5% increase from £7.70 to £8.20 for 21-24-year-olds
  • A 4.9% increase from £6.15 to £6.45 for 18-20-year-olds
  • A 4.6% increase from £4.35 to £4.55 for Under-18s
  • A 6.4% increase from £3.90 to £4.15 for Apprentices

What it Means for Employers

Take into consideration the following steps and come April you will be ready for the change:

  • Check who within your business is eligible. If you are in any doubt and need more information please click here for the government’s employment status page.
  • Make sure your payroll department is aware, for useful guidance on HMRC tutorials please click here.
  • Communicate with ALL your employees and make sure they know about their new pay rate.
  • Make sure that your employees under the age of 25 are earning the correct rate of National Minimum wage, for the correct government rates please click here.

Outlined below are some payments that must be taken into consideration when the minimum wage is calculated:

  • Income tax and National Insurance contributions
  • Wage advances or loans
  • Repayment of overpaid wages
  • Items that workers have paid for that are not needed for the job or paid for voluntarily, e.g. meals
  • Accommodation provided by an employer above the offset rate (£7.55 a day or £52.85 per week)
  • Penalty charges for an employee’s misconduct

The National Living Wage and minimum wage is enforced by HMRC, which is usually initiated by a complaint from workers or a third party. However, officers also have the power to carry out inspections at any time without providing a reason, and can require employers to produce records and other information or access to determine the level of pay received by workers.

If you need any advice on what these changes will mean and how you can comply please contact us on hello@hrrevolution.co.uk or call 0203 538 5311

 

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