National Living Wage Becomes Law

Friday, April 1, 2016

The National Living Wage is not the same as The Living Wage which is not the same as the National Minimum Wage. Confused? Read on ….

1st April 2016 marks the launch of the new National Living Wage. Intended to help raise living standards across the UK, the hike up to £7.20 per hour for over 25 year olds whilst £6.70 remains for 21-24 year olds comes at a time when talk of the Northern Powerhouse is reignited following the recent budget announcements. However, local businesses are once again beginning to feel nervous about the economy. Kirklees-based exporting companies have already felt the effects of ‘the eastern wind’, that is, the global downturn caused by the slowdown in the Chinese economy. Local employers who have established themselves globally for their engineering excellence, particularly in the oil-related industries such as valve manufacture and maintenance, have especially been hit hard in recent months.

But it’s the smaller, less skilled industries who are most likely to fear the effects of this latest government intervention. Those companies operating in the retail and hospitality sectors who pay the old Minimum Wage are likely to feel the effects of the 50p per hour increase (59p when pension and NI are taken into account) more than the skilled or ‘professional  services’ companies who typically are already paying above the National Living Wage and in many cases more than the Living Wage which is set by the Living Wage Foundation at £8.25 in this region and £9.40 in London. Large employers such as Morrisons and Weatherspoons are also protesting the changes, due in part to the volume of staff they employ at the lower end of the pay scales.

“Seen in isolation, it’s easy to criticise yet another ‘burden’ on businesses. When looked at from a more long term, global perspective, efforts to increase the skills levels in the UK through initiatives such as the increase in apprenticeships and more accessibility to higher and further education, will make us more competitive. Being more skilled means our workforce can rightly expect to be paid more. Admittedly there will be some businesses that feel the pain more than others and indeed some may end up going out of business if they are highly reliant on a large number of unskilled workers and are trading with very low profit margins. But, in the longer term, it makes sense to pay staff more. It rewards and incentivises them to work harder, more effectively and remain more loyal to their employer. Research shows that workers who are paid more than the absolute minimum give more back to their employer and also to their local economy. They spend their extra disposable income in local shops, pubs and restaurants. On balance, we at Stafflex are pleased to see the National Living Wage come in but understand the concerns of some businesses who are already at breaking point”, says Brian Stahelin, owner Stafflex Recruitment in Chapel Hill, Huddersfield and President of the Mid Yorkshire Chamber of Commerce.

“We have spoken with every one of our clients and have kept them informed about these changes. I’m pleased to say that we’ve not lost any business as a result of the pay increase but most of our clients are already paying higher rates of pay. It’s those businesses that typically choose not to use professional recruitment agencies such as ourselves who are most likely to be at risk simply because they tend to pay the national minimum wage”, continued Brian Stahelin.

So what are the statutory rates of pay from April 2016

The apprentice rate is £3.30 per hour

16-17 year olds is £3.87 per hour

18-20 year olds is £5.30 per hour

21-24 year olds is £6.70 per hour

25+ year olds is £7.20 per hour

The UK Living Wage, set by the Living Wage Foundation is currently £8.25 per hour (London is £9.40 per hour) – a voluntary recommended amount.

Age discrimination cannot be seen to be applied otherwise the employer is liable to prosecution.

According to The Living Wage Foundation, these rises do not go far enough to address the levels of poverty they claim are increasingly prevalent in the UK.

“We are delighted that the announcement made in the (2015) Budget will see over 2.5 million workers receive a much needed pay rise. This is a massive victory for Citizens UK and those communities, workers and business leaders who have campaigned for a Living Wage since 2001. We agree with the Chancellor that work should be the surest way out of poverty. However, this announcement raises several important questions. 

Rhys Moore, director, Living Wage Foundation recently said, “Is this really a Living Wage? The Living Wage is calculated according to the cost of living whereas the Low Pay Commission calculates a rate according to what the market can bear. Without a change of remit for the Low Pay Commission this is effectively a higher National Minimum Wage and not a Living Wage.

“Secondly, what about London? We have been working with the Mayor of London for seven years and there’s a London Living Wage rate that recognises the higher costs in the capital, currently £9.15 per hour. These changes will not help the 586,000 people for whom even the 2020 rate announced would not be enough to live on now.

“Thirdly, what about the 2 million under-25s who are not covered by this announcement? To make sure workers in London and those under 25 do not lose out, we call on employers to join the group of 1,600 organisations that have already chosen to become voluntary Living Wage employers.”

Please see below some more information about the Living Wage

About the Living Wage

  • The Living Wage is an hourly rate set independently and updated annually. The Living Wage is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis. The Living Wage enjoys cross party support.

  • The UK Living Wage is currently £8.25 per hour (£9.40 in London). This figure is set annually by the Centre for Research in Social Policy at Loughborough University.

  • The Living Wage Foundation accredits businesses and organisations who voluntarily sign up to pay their directly employed staff, and sub-contractors working on their premises, the Living Wage.

  • There are over 1,800 accredited Living Wage employers from Nationwide, Nestle and British Gas to independent breweries, hairdressers and builders merchants.



Benefits of the Living Wage

  • Accredited businesses report that implementing the Living Wage brings significant benefits, including:

    - reduced absenteeism

    - increased productivity

    - increased levels of staff retention

    - improved recruitment options

    - increased consumer awareness of commitment to be an ethical employer