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National Living Wage – What is it and What Does it Mean?

6th April 2016

We’re sure you’ll all have heard the hype surrounding the new National Living Wage as it’s been dominating the news recently. Just in case you’ve been living under a rock for the last few weeks here’s a summary of the new National Living Wage, what it is and who is entitled.

What is National Living Wage?

As of last week (1st April 2016) the Government introduced its new National Living Wage. Basically the National Living Wage is a minimum pay level for those over 25, the current rate for the National Living Wage is £7.20 per hour, which is an increase of 50p from the £6.70 that is the National Minimum Wage for over 21s.

The idea behind the change is to help change the UK from being a low wage, high tax, high welfare society into a high wage, low tax and low welfare society. However, the Government is aiming to increase the National Living Wage year on year, driving the UK’s population to be less reliant on benefits through having much more substantial salaries.

Who’s Entitled to it?

Not everyone is able to receive the National Living Wage. There are certain criteria you have to hit before you’re eligible to receive the new standard rate of pay. A main factor is your age, as you won’t be entitled to the National Living wage if you’re under the age of 25. You also have to be employed, as you can’t be entitled to the National Living Wage if your only source of income is through benefits. If you’re over 25 and you are employed, but you’re in your first year of an apprenticeship, you will also not qualify for the National Living Wage. If you’re a temporary worker working for an agency like Bromak you are still eligible to be paid the National Living Wage.

You can find out whether or not you’re entitled to receive the National Living Wage here.

What Happens if Companies Don’t Pay National Living Wage?

As it is now a legal requirement for all workers over the age of 25 to receive the new National Living Wage of £7.20 per hour, any employer that fails to comply with this requirement can face a penalty of 200% of the amount owed, unless the amount owed is paid to the worker within 14 days. The maximum fine for failing to pay workers the appropriate amount is £20,000. Although this isn’t the only penalty employers can face, as employers who still refrain from paying at this point can be banned from being in a Director position for up to 15 years.

Here’s a brief outline of National Minimum Wage and National Living Wage as of April 2016 depending on your age:

Age Range Pay Per Hour
Apprentice £3.30
Under 18 £3.87
18 – 20 £5.30
21-24 £6.70
25 and over £7.20

 

If you have any questions about National Living Wage you can call the Bromak Payroll Team on 01204 554880 for help or advice.

Chelsey Nuttall
Regional Manager

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