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The National Living Wage will set the minimum wage for those workers aged 25 and over.
This is part of the Government’s strategy to boost living standards for those aged 25 and over. Only time will tell if the age limit needs to be adjusted to reflect the needs and demands of those in their 20s, or if it is subject to an age discrimination claim.
The National Living Wage will apply to all workers aged 25 or over, except for those in their first year of an apprenticeship. It is estimated that the changes will affect over one million workers.
We have set out below a table showing the five National Minimum Wage categories as from 01 April 2016:
Following the introduction of the National Living Wage, it is possible that an organisation could find itself in a situation where a 24-year-old more senior member of staff is on a lesser rate of pay than a 25-year-old with less experience and/or qualifications. This is due to the agreed National Joint Council pay scales which do not currently incorporate the new requirements of the NLW.
The Local Government Association has issued a useful circular setting out their view on the current position, which can be found on the Local Government Association website.
For the moment all we can do is wait and see if there is an agreement reached to amend the National Joint Council pay scale in line with the National Living Wage. However if an agreement cannot be reached by 01 April 2016, employers will need to take steps to ensure that they are paying the appropriate minimum wage to their staff.
An organisation could face severe civil and criminal penalties if it does not comply with the National Living Wage rules.
These could include:
The potential ramifications as set out above are best avoided by ensuring that the National Living Wage is paid appropriately to staff that are entitled to it.
It is estimated that salary budgets will increase by 3.4% as a result of this change, so organisations should start planning for the introduction of the National Living Wage and its impact on budgets now. If your organisation is unable to accommodate this in the long term you may wish to consider making changes to staffing structures or terms and conditions of employment in order to set off a higher salary bill.
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