National Living Wage: What HR leaders need to know

The compulsory national living wage will go live in the UK on 1 April.

The top-up to the National Minimum Wage was announced by chancellor George Osborne in his Summer Budget in July 2015.

It only applies to employees aged 25 or over and is currently set as 55% of median income which equates to £7.20 per hour – 50p more than the minimum wage.

It is expected to reach £9.00 per hour by 2020 – approximately 60% of median income.

However, unlike the voluntary Living Wage, the national living wage has no London weighting to reflect the higher cost of living in the capital.

 

Mitigating the increase

Some firms have been looking to find ways around paying the increased wage to their employees.

Common methods suggested have been to reduce payments for unsociable hours, cut bonuses or remove benefits.

The Independent reported that Tesco and B&Q were two such major firms to take this approach.

However as the Financial Times reported, some law firms have been recommending organisations make sure their staff are self-employed to avoid paying the increase.

The Chartered Institute for Personnel and Development (CIPD) research suggested that employers would expect to see an uplift in productivity as a result of the higher wage bill.

Its Weighing up the wage floor: employer responses to the national living wage report found 32% of large employers expected a rise in productivity to be part of their response. And around a third of employers (32%) added that cuts to corporation tax and national insurance would offset at least some of the extra wage costs.

 

Biggest impact

The Resolution Foundation estimates that the retail, administration, agriculture and accommodation sectors that will be most affected.

This was echoed by healthcare market analyst Laing Buisson which warned that private care home residents could face a 10% fee increase to cover the national living wage and other fee shortfalls.

However it noted that the impact of the national living wage “is expected to be a little less than might have been projected, due to compression of care assistant and domestic pay just above the new £7.20 minimum (for employees aged 25 plus).”

Meanwhile, the government has been urging employees to check their payslips regularly in the coming months to ensure they have been paid the new rate where they are eligible.

The government-funded study revealed that more than one in three workers never checked their payslip – a move which could result in them not being paid enough under the new laws.

Some could see an overall pay rise of £900 this year thanks to the change.

 

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Neil Perkin