National Living Wage

New National Living Wage – Are you ready?

In the Budget in July 2015 Chancellor George Osborne said there would be a new, compulsory living wage from April 2016. This may seem confusing, as there is already a National Minimum Wage and a Living Wage so how does this new Living Wage fit in.

Before the Budget in July 2015 there was:

  • The National Minimum Wage, which is compulsory and is currently £6.70 an hour for those aged 21 and over. There are lower rates for people under 21.
  • The Living Wage, which is an hourly rate set independently and updated annually and is calculated according to the basic cost of living in the UK. The current UK Living Wage (including Scotland) is £8.25 an hour and is £9.40 an hour in London. Employers pay the Living Wage on a voluntary basis.

From April 2016 there will be the new mandatory National Living Wage. This is compulsory and will be paid to all workers aged 25 and over. Initially, it will be set at £7.20 an hour, with a target of it reaching more than £9 an hour by 2020.

The National Minimum Wage will remain in place, and be compulsory for workers under 25. Therefore everyone under 25 will be paid at least the National Minimum Wage with everyone 25 and over being paid at least the National Living Wage.

So this means that from April 2016 there will be different statutory minimum hourly wage rates for different age groups as follows:

25 years and over: £7.20 from April 2016

21 to 24 year olds: £6.70 from October 2015

18 to 20 year olds: £5.30 from October 2015

16 and 17 year olds: £3.87 from October 2015

For apprentices: £3.30 an hour from October 2015.

The voluntary Living Wage of £8.25 per hour (£9.40 in London) remains in place.

Employers must check that any staff under the age of 25 are being paid the correct rate for their age as well as making sure that everyone 25 and over will be paid at least £7.20 per hour.

Many companies are already paying at a level above the National Living Wage but if you would like help to review your pay structures to see how you too can manage to pay the living wage call our experienced pay and reward consultants now.

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