In April 2018 the National Living Wage increased from £7.50 to £7.83 per hour for workers over the age of 25. With the figure set to rise to £9 per hour by 2020, it’s vital that businesses prepare themselves for the changes.

What you need to know

The National Living Wage for over-25s is now £7.83 per hour. This represents a rise of 33p an hour per employee in this age bracket. 21-24 year olds (£7.38); 18-20 year olds (£5.90); Under 18s (£4.20) and apprentices (£3.70) will also benefit from an increased Living Wage.[1]

Employees must be of school leaving age before they can be paid the National Living Wage, and part-time, casual and agency workers are all entitled to receive it. More information about who is and isn’t entitled to the Living Wage can be found here.

Pros and cons

Businesses have been living with the National Living Wage since April 2016, when it was first introduced by then Chancellor of the Exchequer George Osborne. Having had two years to adjust to the legislation, employers seem divided as to its virtues. On the one hand, many companies are reaping the reputational benefits of paying the National Living Wage, with some even becoming accredited Living Wage employers. However, many firms, especially SMEs and start-ups, have found it difficult to cope with the additional cost of paying the Living Wage. On top of the plethora of mandatory costs businesses already face, the additional cost pressure has led several business leaders to call for a rethink, and some commentators have gone so far as to argue that the thinking behind the National Living Wage is economically unsound.

Here at Frontline we believe that the benefits of paying the National Living Wage outweigh the negatives. Being outed as a non-payer of the Living Wage could have catastrophic repercussions for your business, so it’s best to bite the bullet, keep your workforce happy and get yourself prepared.

Make sure you’re prepared

Any contract of employment that fails to guarantee the National Living Wage is not legally binding. Therefore it’s imperative that you find ways to cope with the current Living Wage rate and prepare for future hikes. This may seem daunting for those operating on tight margins, but careful forward planning should help you avoid cash flow problems in the future. Put steps in place now. Think carefully about how many workers you will need for future jobs, how long you will need them for and whether or not they will be permanent members of staff. Only by forecasting your payroll in this way will you be able to prevent having to divert resources from other areas of your business in order to pay the National Living Wage.

You can also prepare yourself by taking expert advice. If you have any queries about the National Living Wage and your legal obligations as an employer, call Frontline today for a confidential consultation.