Coming Soon – The (National) Living Wage

Coming Soon – The (National) Living Wage

Around 12 months ago I attended seminar in Edinburgh hosted by the Living Wage Foundation and subsequently wrote a Blog article detailing the Living Wage campaign and what it may mean to SMEs in the UK.

Fast forward one year and there have been some very important developments in this area and so I thought it worth writing again on this topic and detailing what those updates are.

The main headline is that as of 1st April 2016, all employees and workers aged 25 and over will be entitled to £7.20 per hour which is a 50p per hour increase to the current National Minimum Wage which will remain in place at current levels for those below 25. Employers would be well placed to carry out a review of their salaries and their employee’s ages to determine if any salary increases are required when April comes around.

The Name

I try not to give too much in the way of opinion when blogging and it is important that there is no bias present when disseminating this sort of HR related information, but I do feel there is a point to be made here. The National Living Wage (NLW) is the term being used by the Government which has been somewhat hi-jacked from the pre-existing Living Wage Foundation (LWF) who campaign for employers to pay their staff a higher amount.

The LWF’s voluntary rate (£8.25 per hour or £9.40 per hour in London), which is calculated independently, is already ahead of the new NLW which does not go live until April 2016. This hijacked term, I think, could potentially cause unnecessary confusion for employers and employees in terms of entitlements and furthermore clouds the work that the Living Wage Foundation have been carrying out for well over a decade.

The Impact

Moving away from the trivial matter around how we should refer to the Living Wage, there are more significant issues that are brought about by such a jump to the rates. Businesses who employ staff over the age of 25 will need to consider how they will cope with the higher payroll costs that an involuntary salary increase brings about.

Similarly this creates yet another continual personal details review that affected employers are required to carry out to ensure they are compliant. As with Auto-enrolment, monitoring of an employee’s age to ensure they are paid appropriately is essential.

From a positive impact perspective, employers will be hoping that this increase, although compulsory for those employees who qualify, will perhaps bring about increases to motivation and productivity however improved commitment is perhaps unlikely given any alternative role will also pay this as a minimum.

Finally, as with any increases to salary or similar changes to terms and conditions, employers should inform their staff in writing of the change and place a copy in the personnel file to ensure everything is kept up to date.