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Employers need to prepare for the introduction of the National Living Wage on the 1 April 2016

A compulsory National Living Wage is due to be introduced on 1st April 2016 for all working people aged 25 and over, and will be set at £7.20 per hour. The current National Minimum Wage for those under the age of 25 will continue to apply.

Who will be entitled to the National Living Wage?

Generally all those who are covered by the National Minimum Wage, and are 25 years old and over, will be covered by the National Living Wage these include:

  • employees

  • most workers and agency workers

  • casual labourers

  • agricultural workers

  • apprentices who are aged 25 and over.

Would a dismissal be automatically unfair if it was to avoid paying the National Living Wage?

An employee is automatically unfairly dismissed if the reason (or principal reason) for dismissal is that they qualify (or will or might qualify) for the national minimum wage or a particular rate of it.

The key question for a tribunal to consider would be the reason why the employee was dismissed; in other words what was the employer’s conscious or subconscious reason for the dismissal? The decision will be influenced by the extent to which there was a genuine business need for the change.

Penalties for failure to comply

With the introduction of the National Living Wage the penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days.

The maximum fine for non-payment will be £20,000 per worker. However, employers who fail to pay will be banned from being a company director for up to 15 years.

The Low Pay Commission

The Low Pay Commission which currently recommends the level of the minimum wage will recommend any future rises to the National Living Wage rate.

The Living Wage

The new National Living Wage is different from the Living Wage, which is an hourly rate of pay and updated annually. The Living Wage is set independently by the Living Wage Foundation and is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis.

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