National Living Wage – is it workable?
5 April 2016 by Tony Fisher
A new mandatory National Living Wage (NLW) has come into force today requiring all employers to pay a wage of at least £7.20 per hour to any employees above the age of 25. Workers aged between 21 and 24 will still be entitled to the minimum wage of £6.70 an hour but the change is still expected to instantly improve the pay of around 1.3 million people.
Despite the positives that an extra £900 a year will bring to those over 25, the Trades Union Congress has remained critical of the current wage legislation and has stated that those aged 21-24 have been left behind somewhat, and that the job of tackling low pay is far from finished. They expressed the importance of businesses aiming higher than simply “not breaking the law” and paying a rate that accurately reflects the real cost of living when they can afford to do so.
The NLW is expected to have a substantial effect on small businesses and there have been fears of job losses as some companies struggle to pay the higher wages. Care businesses in particular have expressed doubts over whether they will be able afford the new NLW without receiving an increase in government funding. If not, they risk cutting staff numbers and those that do remain feeling discontented and though they cannot remain in a job with a higher level of responsibility and pay that is only slightly increased.
Even some large employers have begun looking for ways to reduce the impact of the wage increase by cutting other areas of their employees’ pay packages. Samworth Brothers, the makers of Ginsters pasties and sandwiches, are cutting Sunday and bank holiday pay, and removing paid tea breaks altogether. They estimate that even with the recent increase in pay, some workers will lose around £5 per week. B&Q, a huge employer with over 25,000 staff, also plans to scrap the premium rates for working Sundays and bank holidays, along with cutting summer and Christmas bonuses.
So, though the NLW will have a positive impact on the lives of some people, many will also continue to struggle and the issue of low pay remains a real one, which is unlikely to be solved just by hiking up wage rates. As Adam Marshall of the BBC stated: “The best way to get a high-pay Britain is through better education, training, and investment, by schools, universities and businesses alike”.
If you are an employer or employee needing advice on this topic or on anything else in relation to Employment law please contact us via email at BBaird@fjg.co.uk or by phone on 01245 890110.