Summary: The National Living Wage comes into force on 1 April 2016. The new higher rate of pay creates many pitfalls for employers. Get it wrong and you can end up with very significant financial, employment law and reputational liabilities.
A handy checklist of the practical steps
Many of the steps for making sure you comply with the new requirements, and continue to do so, are intensely practical.
For example, have you:
- identified who is eligible for the new £7.20ph rate and who will soon be eligible when they turn 25;
- properly communicated the changes with your staff; and
- considered strategies to mitigate your increased wages bill?
Don’t forget discrimination and other employment law risks
Whilst it is lawful to pay those aged 25 and over the higher National Living Wage rate, employers face age discrimination and other employment law risks if they operate the regime wrongly:
- Beware preferentially recruiting under-25's because they're cheaper: this is likely to be unjustified age discrimination.
- Avoid firing someone or making them redundant just because they’re 25 and so are entitled to the NLW: this is again likely to be age discrimination and also automatically unfair dismissal.
- Large fines for non-compliance: in addition to having to make good any National Living Wage underpayment to affected workers, HMRC can fine employers for getting it wrong - up to 200% of the underpayment (capped at £20,000 per affected worker).
- Public naming and shaming: the government has stepped up its programme of publicising employers who flout minimum wage laws. This is likely to continue under the National Living Wage regime.
The government plans to increase the National Living Wage progressively to £9 per hour by 2020. It’s therefore important for employers to ensure that they have in place a proper strategy for managing the new regime and mitigating its progressively increasing costs. Our National Living Wage checklist for employers includes some possible mitigation strategies for employers to consider.