In just a few weeks, Chancellor George Osborne will begin to phase in the new living wage. The Financial Times describes this as a “bold experiment” to force up the wages of low-paid workers, but what does this really mean and who does it apply to?
What is the national living wage?
The national living wage is essentially an increase in the minimum wage, and is being phased in over several years. It begins with a 50p rise in the lowest rate to £7.20 an hour, increasing each year with the aim of reaching 60% of median pay across the UK by 2020, when it could be as high as £9.35 an hour.
The first rise will begin on 1st April 2016 and will become law. It applies to anyone who works aged 25 and over, although not in the first year of an apprenticeship.
What does it mean for employers?
If you’re an employer, you’ll need to make sure you’re paying your staff correctly. Now is the time to start taking the appropriate payroll action, let your staff know about their new pay rate and check that staff under 25 are earning the correct rate.
So what’s the verdict?
The response has been quite mixed so far. Some sectors have already implemented the new rise. Retailers have caught the eye of the press with the likes of Aldi increasing its hourly rate to all workers, whatever their age to £8.40 and rival Tesco setting out a rate of £7.62, but other areas have been cut, such as bonuses and anti-social hour pay.
As minimum wages go, it’s been compared by the Financial Times as pretty high, with the eventual rate certain to be “one of the highest” of all the developed economies.
Overall it seems that the increase will be welcomed, should boost spending, and ultimately help the economy.
For further information about the increase and assistance with payroll, contact B20Ltd.