It was 6 weeks ago today that the National Living Wage became compulsory. For those workers aged 25 or over who were paid the minimum wage of £6.70, they started receiving an additional 50p per hour. Whilst it might not sound much, there have been reports that this increase is causing businesses to struggle. Some have reacted by making savings elsewhere (such as withdrawing employment benefits) and others have raised their prices to push the additional costs onto consumers.
In less than 5 months time, the national minimum wage rates will increase. Whilst the National Living Wage for workers over 25 will remain at £7.20 per hour, the following increases will apply:
- For those aged 21 to 24, the National Minimum Wage will be £6.95 per hour (from £6.70);
- For those aged 18 to 20, it will be £5.55 (from £5.30); and
- For those aged 16 to 17, it will be £4.00 per hour (from £3.87).
Apprentices will also enjoy a rate change from £3.30 to £3.40 per hour.
Will businesses simply absorb these further costs? Will we see redundancies and cost-cutting? Will it result in price increases? We will have to wait and see.
If workers are paid below the minimum wage, they are able to bring a claim against their employer to recover the arrears. HM Revenue & Customs may also take enforcement action which can lead to criminal prosecution, although it is more common for a notice of underpayment to be issued and for the employer to be publically named and shamed in a Department of Business, Innovation and Skills list.
From 1 April 2016, the government introduced a new mandatory national living wage (NLW) for workers aged 25 and above, initially set at £7.20 - a rise of 50p relative to the current National Minimum Wage (NMW) rate. That’s a £910 per annum increase in earnings for a full-time worker on the current NMW. The adult NMW rate is currently £6.70.