As we kick off the New Year, the countdown is on to one of the biggest employment changes of 2016. That’s because 1 April sees the introduction of the new National Living Wage (NLW), which all employers will need to pay to staff aged 25 and over.
The NLW will be set at the initial rate of £7.20 per hour and will work as a new top up rate of the existing National Minimum Wage (NMW), which will remain in place. For those under 25, the current NMW rates will continue to apply, i.e. £6.70 per hour for those aged 21 to 24.
This will be a big issue for many employers as they consider how to introduce it. It’s believed that around 3.2m workers in the UK will be directly affected as their pay rises as a result of the NLW, with research predicting that the biggest impact will be to employers in the lower paying cities outside of London, such as Sheffield and Nottingham.
Our experience from speaking to and acting for employers in the hospitality, retail and care sectors who only pay staff the minimum wage (and no more) is that the introduction NLW will definitely impact on how they operate and manage their workforce moving forwards.
The reality is that this increased hourly rate could lead to less hours being offered to staff, fewer jobs being created and even redundancies – as employers consider how to absorb this extra cost.
On the flip side, this higher wage could help to boost productivity, retain and motivate existing staff, and should therefore be seen as a positive step to help grow your business.
With the NLW expected to rise to at least £9 per hour by 2020 and affecting around 23% of the UK workforce, employers will need to plan ahead for the year on year pay increases – so don’t wait, take action and get your business ready for the changes now!
Written by Mike Patterson of Berwins Solicitors.