• The National Living Wage will launch in April 2016 – what do you need to know and how will this affect employers and employees?

    The first increase is in April 2016 to £7.20 per hour, applying to employees aged 25 and over. This is a direct increase of 11% on the £6.70 national minimum wage, although it doesn’t include related increases such as pension, benefits and insurance cover costs.

    This figure will eventually hit £9.00 in 2020; how this happens will be established by the Low Pay Commission. The Chancellor said his planned 2% corporation tax cut and increasing the national insurance free employment allowance to £3,000, would help offset increased costs. However, many small businesses are worried this still will not be enough.

    Employee and employer representatives have disagreed about the merits of the move, however, both agree this is a seminal shift. The Office of Budget Responsibility estimates 60,000 jobs could be lost, although the Chancellor claimed the Budget as a whole stood to create over a million jobs, with an estimated 6 million people benefiting from increased pay.

    Many commentators are predicting a shift from employed positions to self-employment to avoid the living wage, or a shift to employing those under 25. The government has underlined a lower wage must apply to younger people to enable them to “secure work and gain experience”.

    Considering the increased gap between national minimum wage rates for those under 25 and those 25 and over, it will be interesting whether this justification continues to stand up to potential legal challenges on age discrimination grounds

    This content is correct at time of publication

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