Back in its summer budget, the Government announced its intention to introduce the National Living Wage, and last week we saw the publication of the draft National Minimum Wage (Amendment) Regulations which provide for its introduction.
Despite the difference in name, the National Living Wage will operate in much the same way as the National Minimum Wage in that it sets a minimum sum which must be paid to workers.
As of 1 April 2016, employers will be obligated to pay all workers over the age of 25 £7.20 per hour. This is an increase from 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
- Worker aged between 18 and 21: £5.30
- Workers under 18: £3.87
- Apprentices: £3.30
Failure to pay the minimum wage may result in both civil liability to make payment to workers and/or criminal penalties. Furthermore, BIS has recently announced a package of measures intended to improve compliance with national minimum wage legislation.
The draft regulations confirm the intention to double the potential penalty for non-payment. The current penalty is 100% of the worker's underpayment. From April 2016, this will increase to 200%. The maximum penalty is £20,000.
Furthermore, BIS's proposed measures include increasing the budget for the enforcement of the minimum wage and establishing a new HMRC team dedicated to pursuing the most serious cases of employers deliberating not paying or avoiding paying minimum wage.
It is clear from the announcements that the government is intent on ensuring compliance with the living wage, and with the introduction of higher penalties, it is important that employers are aware of the rules and don't fall short in any payments.
What's more, HMRC have the power to refer employers who fail in their obligations to pay minimum wage to BIS for naming and publicly "shaming".
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
