National Living Wage

National Living Wage

One of the most notable announcements in this years’ Summer Budget was the introduction of a compulsory National Living Wage.

The new National Living Wage of £7.20 per hour will take effect from April 2016, being a top-up of 50p per hour to the National Minimum Wage (£6.70) for those employees aged 25 and over. The National Living Wage is set to increase each year, eventually hitting £9.00 per hour by 2020.

You may want to consider the cost implications of this for your business and importantly you may need to be aware that employees cannot make a ‘salary-sacrifice’ which takes them below the hourly minimum (£7.20) and you therefore may need to reconsider any existing or future sacrifice arrangements.

While many have been calling for the introduction of a ‘Living Wage’ for some time, it’s important to recognise the difference between the Chancellor’s’ newly announced National Living Wage and the Living Wage that is voluntarily paid by some employers.

The ‘other’ Living Wage that is talked about is calculated according to the basic costs of living in the UK by the Living Wage Foundation. There are two rates, a UK rate which is £7.85 and a London rate which is currently £9.15. Employers can choose to pay the Living Wage on a voluntary basis.

If you’d like any further information on the new National Living Wage, please don’t hesitate to contact us,