In December 2015, the National Minimum Wage (Amendment) Regulations 2016 were laid before Parliament specifying details about the new National Living Wage (NLW) From 1st April 2016, workers in the UK aged over 25 earning the current minimum wage of £6.70 per hour will be entitled to a 50p increase taking it to £7.20 per hour.
This is great news for many employees, with many individuals expected to take home an extra £900 a year Yay! however, employers, you need to make sure that you’re ready and that you’re going to be fully compliant with the new legislation by the time that April comes round.
What do you need to know?
Let’s get started with looking at the tasks that you need to work through.
Check who is eligible for the NLW
This may require you to consider the changes that need to be made to your full suite of HR policies and procedures and every aspect of your people practices.
You may find that you need to update any recruitment materials with the new hourly rate or make changes to your employee handbook and any induction content that you share with new recruits. Take a step back, and think how the changes could have a knock-on impact, and what you’ll have to get covered. It’s worth doing a full audit to make sure that you will be fully compliant.
Take appropriate payroll action
If you outsource your payroll to another organisation, you’re going to have to have a conversation with them ASAP to make sure that there are no administrative glitches once the new legislation comes into force.
The good news here is that they’ll be working with business owners just like you every single day right now, and making sure that they’re supporting them through the changes. Ask plenty of questions, and take all the advice that you can get. Working in collaboration here will bring about the best results.
It is hugely important that you keep your staff abreast of any impending changes, especially in low paid businesses raising the hourly rate of your lowest paid employees might mean that they’re now earning the same as their supervisors. Obviously, this could cause unrest. It’s likely that those with more responsibilities will take issue with the fact that they appear to be no longer receiving an incentive for their hard work. This is by no means indicative of every low paying organization but if this applies to you need to make some difficult decisions and it’s vital that you take a clear direction that’s well communicated to the staff.
As you can see, it’s not strictly a matter of giving your employees that extra 50p for every hour that they work. There’s a lot to consider, and there’s a very tight deadline that you need to adhere to.
The Regulations also clarify that the NLW will operate in exactly the same way as the national minimum wage (NMW), effectively, as a fifth – premium – rate. However, to ensure that all employers properly comply with their legal obligations, the financial penalty in the event of a NLW/NMW breach will rise from 100% to 200% of the underpayment on 1 April 2016. Such penalties are applied in respect of each worker who has been incorrectly paid.
If you need assistance in ensuring that you’re compliant, then give us a call. We have a team waiting to help.