The National Living Wage – what will it mean?

In the July budget the Chancellor announced the new National Living Wage. This is in effect a replacement for the National Minimum Wage, but will only apply to those over the age of 25.

The National Living Wage will come into effect in April 2016, and increase the minimum which may be paid to those who qualify to £7.20 per hour (as opposed to the then National Minimum Wage rate of £6.70 per hour for those aged over 21). The National Living Wage rate will then increase in stages to £9 per hour by 2020.
Since the announcement concern has been expressed by several organisations that the increase in their wage bill will not be affordable. For example, in the charity sector, it has been estimated by the Third Sector Research Centre that the additional cost for the period 2016 to 2020 will be in the region of £500 million. Similar concerns have been expressed by the care sector, retailers, the hospitality industry and others.

One area of concern which has been expressed is that no one seems to have recognised the knock on effect for those not paid the lowest wages. For example, someone now earning £8.50 an hour is being paid £2 more than someone on the National Minimum Wage. If the person at the bottom gets a substantial pay rise, then the differential is eroded, and that is likely to lead to some discontent.

We wait to see how some of the uncertainty regarding aspects of the National Minimum Wage will impact on the National Living Wage. For example, will people be entitled to be paid the National Living Wage for on call time, travel time etc? We will have to see how the legislation and case law develops, but it seems likely that the areas of uncertainty will continue. We will of course continue to keep you updated on this in our monthly ebulletins.

If you would like to discuss how the National Living Wage may affect your organisation, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.