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Decent Living Wage

Don't be caught out by the relatively new regime brought in with the National Living Wage

You will have read in these pages about the number of pubs and restaurants in the hospitality sector recently named in the Department for Business, Energy and Industrial Strategy’s list of 360 businesses that failed to pay their employees the National Living Wage (NLW) and National Minimum Wage (NMW).

Whilst we are all familiar with the NMW introduced in 1999, some employers are clearly being caught out by the relatively new regime brought in with the NLW.

Introduced in April 2016, the NLW is the minimum hourly wage for workers aged 25 or older and is currently set at £7.20. For those aged 24 or younger the NMW still applies but it is important to note the varying wages based on age brackets. As of October 2016, the current NMW hourly rates are set at:

  • £6.95 for those aged 21-24;
  • £5.55 for those aged 18-20;
  • £4.00 for under 18s; and
  • £3.40 for apprentices aged 16-18, or apprentices aged over 18 in their first year. All other apprentices are entitled to the NMW for their age.

Whilst these are the current rates, it is not long before they will rise again. From April 2017 the NLW will be £7.50 and the NMW is set to go up to:

  • £7.05 for those aged 21-24;
  • £5.60 for those aged 18-20;
  • £4.05 for those aged 18 or under; and
  • £3.50 for apprentices

Historically the NMW usually changed every October, but the government state that the rates will change every April and the intention is for the NLW to exceed £9.00 by 2020. It is obviously important for employers to keep up to date with the changes to avoid falling fowl of the law.

The most common excuses to come from the recently named offenders were that tips were used to top up wages, deductions were made to pay for Christmas parties and that staff had to pay for their own uniforms. It is therefore worth noting that these measures will not excuse an employer from paying the minimum hourly rates.

Failing to pay the required minimum rates could result in a fine of up to £20,000 per employee and payment of 200% of arrears. There is also scope for criminal proceedings to be brought against an employer, but the government has indicated that this would be reserved for instances of persistent non-compliance, repeated failure to cooperate with compliance officers and generally the most serious cases.

The government also recognises that a lot of businesses will be more likely to respond to the threat of damage to their reputation and are therefore applying the “name and shame” policy that we have seen recently.
So if you want to keep your workforce happy and your name out of wrong kind of press, keep your eye on the NLW and NMW.

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