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Why is the National Living Wage important to employment law?

Oct 3, 2017

The National Living Wage (NLW) was introduced in 2016 as an enhancement to the National Minimum Wage (NMW) for workers aged 25 and above, and is currently set at £7.50.  NLW is not mandatory however for workers underneath 25, and so employers have a choice at their own discretion as to whether they extend the entitlement to their employees under 25.  Howard Robson, Employment Partner, answers some important questions for employers as to why NLW is something that should not be ignored.

Must I pay my employees National Living Wage?

As NLW is mandatory for all workers aged over 25, if an employer chooses not to pay this, they could be taken to court by HMRC, or could be taken to an Employment Tribunal by the employee.  The penalties imposed by HMRC will want to be avoided by all businesses; non-payment can incur a penalty of 200% of the amount owed, unless arrears are paid within 14 days, with the maximum fine up to £20,000 per worker.  Financial penalties are not the only concern, as employers can be banned from taking up any position as a company director for up to 15 years, and consideration should be given to the reputational damage that could be caused. 

Is the National Living Wage applicable to both public and private sector?

The NLW does apply to both public and private sectors, ensuring that all employees have access to a living wage, no matter their sector or industry.  All businesses benefit from offering the NLW; the Living Wage Foundation has found that, since its implementation, the NLW has improved recruitment, retention, morale and reduced absenteeism across the sectors.

Is the National Living Wage applicable to both full time and part time employees?

As the NLW is an hourly figure, it is applicable to both full time and part time employees, as well as ‘workers’; people who are engaged to undertake work personally but not properly self-employed.  By introducing this additional level of pay, NLW is helping to bridge pay gaps across the genders, as well as for disabled employees.

How could Brexit change the future of pay?

While we are still in a state of limbo regarding Brexit and the ability we will have to set our own legislation, employees will continue to have the right to either NMW or NLW.  It will be interesting to see if any plans to extend the NLW to those under 25 come to fruition, or whether Government has put this on the back burner until we leave the EU.

The introduction of the National Living Wage has been a boost to employees, and evidently employers when looking at the findings from the Living Wage Foundation.  It is important that employers review their pay regularly, which will include findings from appraisals, and for those employers with over 250 employees, this will come from their Gender Pay Gap report.  Employers who have a variety of staff, for example those who include sleep-on workers, may need advice when it comes to calculating wage for their workforce, and it’s clear to see from the fines imposed by HMRC, that this is a topic very important to our Government in seeing fair pay for our employees.

If you would like advice on the National Living Wage and pay for your employees, you can contact Howard on 02380 717717 or email employment@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.