The new national living wage comes into force on the 1st April 2016 and applies to workers over the age of 25 at the rate of £7.20.
For workers under the age of 25, the rates will remain unchanged.
The current rates are as follows:
21-25 years- £6.70 per hour.
18-20 years- £5.30 per hour
16 -18 years- £3.87 per hour.
Critics of the wage have suggested that employers may attempt to circumvent the effects of the increased costs to their business by actively recruiting younger employees, which would be tantamount to age discrimination. Recently companies such as Tescos and Morrisons have announced that they would be cutting back on extra remuneration for employees working unsocial hours in a bid to fund the boost to pay rates. B&Q is reported to be planning to cut Sunday pay and reduce its bank holiday rates whilst increasing its basic pay above the government’s national living wage.
It will be essential for employers to ensure that they pay their employees the correct hourly rate. The penalties for non compliance will be 200% of the amount owed to the employee, unless the arrears are paid within a 14 day period.
The maximum penalty fine for non payment of the correct hourly rate will be £20,000 per worker. Employees who fail to make payments can be banned from being company directors for up to a period of 15 years.
It will be interesting to see further reaction to this topic in the up and coming months.