The National Living Wage - what's happening

From April 2016, the Government will introduce a new National Living Wage (NLW) for workers aged 25, it is a cornerstone of the drive to make work pay and reduce reliance on the benefits system.  It will be mandatory for employers to pay the NLW, which should not be confused with the similarly named Living Wage that is promoted by the Living Wage Foundation and is voluntary.

Initially the NLW will be set at £7.20 per hour; this is 50 pence above the Age 21 rate for the National Minimum Wage, which increased to £6.70 from 1^st October 2015.  The Government has asked the Low Pay Commission to recommend future increases to the NLW with the stated objective that by 2020 the NLW should be at least £9.00 per hour, which it is anticipated, will be equivalent to 60% of median earnings.

On the face of it the change appears fairly simple, after all it is in effect a new National Minimum Wage rate payable only to those aged 25 and over. However, it’s not quite as straightforward as it may sound and potentially raises a number of issues that employers need to consider.

What do you need to think about?