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How will the National Living Wage affect you?

By Natalie Ponting on 16 Mar 2016

On 1st April 2016, the UK government will introduce the National Living Wage, but what exactly is it and how will it affect your organisation?

The National Living Wage will essentially be a fifth tier of the National Minimum Wage, applying to workers aged 25 or over, so the minimum wage levels will be as follows:

 

Age Range

Minimum Wage

Rate Type

Applies until

25 and over

£7.20

National Living Wage

April 2017

21 to 24

£6.70

National Minimum Wage

October 2016

18 to 20

£5.30

National Minimum Wage

October 2016

Under 18

£3.87

National Minimum Wage

October 2016

Apprentice*

£3.30

National Minimum Wage

October 2016

 

*This rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

The Government aims to increase the National Living Wage over time and it is expected to reach over £9.00 per hour by 2020. However, while the National Minimum Wage is usually reviewed in October, the National Living Wage will be reviewed in April (for the next year at least).

The National Living Wage should not be confused with the Living Wage, which is a voluntary hourly rate that applies to any employee or worker aged 18 or over. The Living Wage rate is set independently by The Living Wage Foundation, and is defined as the amount that people need to enjoy a “basic, but socially acceptable standard of living”. The current rate is £8.25 per hour (or £9.40 in London, where cost of living is higher).

The Government has announced that fines for non-payment of the National Living Wage will be 200% of unpaid wages, up to a maximum of £20,000 per worker. In addition, non-compliant employers will be subject to “naming and shaming” and disqualification as company directors for up to 15 years.