We have had several calls from employers asking us about the National Living Wage and whether or not they have to pay it to employees. The answer is YES. It is a legal requirement it’s not something you can chose to pay if you want to. It is different from the Living Wage which is not compulsory.

The compulsory National Living Wage is due to be introduced on 1st April 2016 for all working people aged 25 and over, and will be set at £7.20 per hour. The current National Minimum Wage for those under the age of 25 will continue to apply. As an employer you will need to make sure you are paying staff correctly as the National Living Wage will be enforced as strongly as the current National Minimum Wage. This means your business could be named and shamed on the Government website.

Key points

  • HM Revenue &Customs (HRMC) can take employers to court for not paying the NLW.
  • The compulsory National Living Wage is the national rate set for people aged 25 and over.
  • The NMW rates for those aged under 25 change on 1 October every year whilst the NLW rate for those aged 25 and over will change every year on 1 April.

Who will be entitled to the National Living Wage?

All those who are covered by the National Minimum Wage, and are 25 years old and over, will be covered by the National Living Wage these include:

  • employees
  • most workers and agency workers
  • casual labourers
  • apprentices who are aged 25 and over

Penalties for failure to comply

With the introduction of the National Living Wage the penalty for non-payment will be 200% of the amount owed, unless the arrears are paid within 14 days.

The maximum fine for non-payment will be £20,000 per worker. However, employers who fail to pay will be banned from being a company director for up to 15 years.

The Low Pay Commission

The Low Pay Commission which currently recommends the level of the minimum wage will recommend any future rises to the National Living Wage rate.

The Living Wage

The new National Living Wage is different from the Living Wage, which is an hourly rate of pay and updated annually and this is where some employers are getting confused. The Living Wage is set independently by the Living Wage Foundation and is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis. The National Living Wage is compulsory.