Living Wage – What is it all about?

On 8th July George Osborne announced the following:

  • Introduction of a new National Living Wage for workers aged 25 and above, and asks the Low Pay Commission to set out how it will reach 60% of median earnings by 2020; based on Office of Budgetary Responsibility (OBR) forecasts, this means that the National Living Wage will reach the government’s target of over £9 by 2020.

But what does this mean to businesses?

  • From April 2016 employees over the age of 25 are to be paid at a rate of £7.20ph
  • The National Living Wage is perceived as being a premium on top of the National Minimum Wage
  • The National Minimum Wage is still in place for those under 25 (see table)
  • The current National Minimum Wage is still due to increase to £6.70ph from October 2015

There is some support to businesses to help pay for part of this additional cost.

  • The employment allowance, currently set at £2,000 will be increased to £3,000, this increase will pay for the cost of the employers NI when employing 4 full time individuals paid at NLW.
  • Corporation Tax is being cut to 18% from 20%

National Minimum Wage / National Living Wage rates

Hourly RateOctober 2014October 2015April 2016
Workers aged 16-17£3.79£3.87£3.87
Workers aged 18-20£5.13£5.30£5.30
Apprentices£2.73£3.30£3.30
Adult 21+£6.50£6.70-
Adult 21-24--£6.70
Adult 25+--£7.20

 

Leave a Reply