As highlighted in our summer budget back in July 2015, the government announced its intention to introduce a new National Living Wage. Chancellor George Osborne clearly stated that the new legislation was designed to assist a move “from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society.”
As a business owner what does this actually mean for you?
From 1 April 2016 if you run a business who employs anyone over the age of 25 who is not in their first year of an apprenticeship you must pay them at least £7.20 an hour. This equates to an increase in the current minimum wage by 70p.
The rates for other age groups are also increasing, and from April the following rates will apply:
- Worker aged between 21 and 25:- £6.70 an hour
- Worker aged between 18 and 21:- £5.30 an hour
- Workers under 18:- £3.87 an hour
- Apprentices:- £3.30 an hour
To work out exactly how much this is going to cost you, HMRC have provided a handy National Minimum Wage Calculator. Enclosed is the link to the dedicated .gov.uk page:-
Failure to Comply
HMRC clearly regarding on non-compliance to the rules:-
“It’s a criminal offence for employers not to pay someone the National Minimum Wage or to falsify payment records”.
This means that failure to pay the minimum wage or falsify payments may result in both civil liabilities and/or criminal penalties. Draft legislation backs up this statement as the Government’s intention is to double the potential penalty for non-payment. The current penalty for noncompliance and payment of the minimum wage is 100% of the workers underpayment. From April 2016, when the New Living Wage legislation commences, penalties will increase to 200%, rising to a maximum penalty of £20,000.
HMRC has also backed the penalty regime with a dedicated taskforce, pursuing the most serious cases of Employer’s avoiding non-payment of the New Living Wage. Part of this process is the “naming and shaming” of such offenders.
Clearly then it’s important that you calculate the cost and ensure that you are compliant with the new changes that are imposed from 1 April 2016.
Should you have any queries in relation to any of the information referred to above, please contact a member of the WHA dedicated Payroll Team.