Paul Sullivan, Managing Partner
The new National Living Wage (NLW), to sit alongside the national minimum wage (NMW), comes into force in April 2016. The rate will be £7.20 an hour for anyone over the age of 25. This represents an increase of 70 pence per hour on the current NMW.
The Government will also introduce new penalties for non-payment of both the NMW and the new NLW. These penalties include being struck off from being a company director for anywhere up to fifteen years or being fined up to 200 per cent of the arrears they owe to their workers, with a maximum fine of £20,000 per worker.
This new policy is not without its critics – Justin King, former Chief Executive of Sainsbury’s, commented that the new NLW and its sanctions would destroy jobs and that employers would expect even more from their employees. (BBC News, 29th August 2015)
The CBI has also levelled criticism towards the government over this policy. As the UK’s leading business lobbying group, their director-general, John Cridland, identified that the NLW was the biggest challenge faced by businesses in the UK. In particular, he identified a number of sectors such as retail, social care and hospitality that would find these new measures particularly challenging. (The Guardian, 10th September 2015).
The desire of the Government to reduce the overall welfare bill by shifting the burden of Tax Credits to the employer may well prove counter-productive with the potential to yield an increase in claims for unemployment benefits. The Office for Budget Responsibility (OBR) has calculated that as a result of this increase, over 2.75 million workers in the UK will benefit from a direct pay rise, but this is likely to have an impact on employees. The CBI quoted figures from an independent report that showed that as a result of these plans, there will be fewer jobs and that hours per week worked will be reduced by almost 4,000,000 a week in the next 5 years.
Whatever the impact, only time will tell. Either way, it will be imperative for businesses to tighten up their payment practices to ensure they don’t get hit with significant penalties.
For more information about this article or any aspect of our business and personal legal solutions, please call us now on +44 (0) 28 9077 4500 and we will be delighted to help you (there is no charge for initial telephone discussions).
0+
