From 1 April 2016, a new National Living wage of £7.20 per hour will be introduced. This new compulsory wage will apply to all employees, most workers, and apprentices aged 25 years and over. This will be the largest annual increase in a minimum wage rate since 2009 in cash and real terms.
The National Minimum Wage continues to apply for those under the age of 25. The rates from 1 October 2015 are as follows:
- £6.70: for 21s and over
- £5.30: for 18 to 20-year-olds
- £3.87: for under 18s
- £3.30: for apprentices (the rate applies to all apprentices in year 1 of an apprenticeship, and 16-18 year old apprentices in any year of an apprenticeship).
To make sure every employer pays it, harsher penalties will be imposed for breaches. Employers who fail to pay the National Living Wage will face a penalty of up to 200% of the amount by which an individual has been underpaid. The maximum fine for non-payment will be £20,000 per underpaid person. As an additional penalty, employers who fail to pay could be banned from being a company director for up to 15 years. It is intended that a new team will be set up within HMRC to pursue criminal prosecutions of those who deliberately fail to comply. The Government will continue its policy of naming and shaming employers who do not pay the minimum rates.
The Low Pay Commission currently recommends the level of the National Minimum Wage, and will also recommend any rises to the National Living Wage rate. Both will be reviewed annually. The National Minimum Wage rates usually change on 1 October every year whilst the National Living Wage rate is expected to change each 1 April.
All employers need to ensure that they are paying the correct rates of pay. Employers should ensure that employees, workers and apprentices aged 25 or over are receiving the National Living Wage from 1 April 2016. Any future employment contracts will need to reflect the new pay rate.
Be aware that an innocent mistake will still attract the fine, so ensure to ensure you’re fully compliant by checking who is eligible for the National Living Wage; taking the appropriate payroll action; and communicating the changes to staff as soon as possible.
Our Employment Solicitor Kate Coyer is happy to assist you with any National Living Wage enquiries as well as all other aspects of employment law.