National Living Wage

What is the National Living Wage?

A new ‘National Living Wage’ (NLW) of £7.20 per hour will be introduced next April for all working people aged 25 and over, the Government announced during its July budget.

The National Minimum Wage (NMW) for those aged 21 and over currently stands at £6.70. But in April 2016, those aged 25 and over will get a ‘premium’ of 50p on top to bring the total to £7.20.

The NLW represents 55 per cent of median earnings, which the Government has said will increase to 60 per cent ‘subject to sustained economic growth’. The intention is that the NLW will be more than £9 by 2020.

The Low Pay Commission, which has been responsible for recommending the levels for the NMW, has had its remit broadened for the National Living Wage.  It has been asked to take into account the state of the economy, employment and unemployment levels when it makes its recommendations in relation to the premium.

Who will receive the NLW?

It currently appears that the new NLW will apply to all categories of individual who are currently eligible to receive the National Minimum Wage (provided they are aged 25 or over). However, this is subject to confirmation when further details of the scheme are available and/or legislation is published to bring the new compulsory payments into effect.

The National Minimum Wage is currently payable to employees, most ‘workers’ (defined as an individual working under a contract ‘to personally do or perform work or services for another, provided that the other is not a customer or client of a profession or business undertaking carried on by the individual’); and agency workers (It is the responsibility of the person who actually pays the agency worker to ensure that statutory minimum pay is received).

Individuals who are genuinely self-employed, and charge an hourly or daily rate to the service user, are not entitled to receive the National Minimum Wage as they are able to self-determine an appropriate rate for their services.

Volunteers, work experience or placement students and some apprentices will be excluded from the NLW.

A survey released by the Federation of Small Businesses (FSB) has revealed that a significant amount of small firms are concerned about the potential impact that the new National Living Wage (NLW) will have on their businesses.

Of the firms that are likely to be negatively affected, some 50% said they would increase prices, while 52% reported that they would put off hiring new recruits to help offset the wage hike.

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