Employment The national living wage – what you need to know

The national living wage applies which is currently £7.05 per hour, to pay for those aged 25 and rising to £7.38 per hour in April. Summary over. Employers will be required The Government implemented to pay a minimum of £9 per hour What is the living wage? the national living wage from by 2020, with the first increase It is important to distinguish 1 April 2016, ensuring a having taken effect in April between the national living wage sustained rise in minimum hourly pay for all employees 2016. This factsheet explores and the living wage, which is aged 25 and over. the impact of this change and promoted by action group the Living Wage Foundation. There also looks at the voluntary Many employers have taken are significant differences a commercial decision to living wage promoted by the between the two. Living Wage Foundation. increase minimum pay to The national living wage is a the rates recommended by Background premium that is added to the the charity the Living Wage Foundation. The Foundation The national living wage was a minimum wage for workers aged 25 and over. The living wage refers campaigns for pay to reflect response to nationwide debate the basic cost of living in the on the issue of the living wage to how much an average worker needs to earn in order to be able UK and counts over 4,800 and sustained pressure from employers as voluntary independent campaign group the to cover the basic cost of living in the UK. It follows that as the cost subscribers to its living Living Wage Foundation. It was wage policy. met with mixed reactions from of living rises, so too should pay. employers, some believing it to From 5 November 2018 the be unrealistic and unaffordable living wage is £10.55 per hour while others maintain that it is fair in London and £9.00 per and attainable. It is intended that hour in the rest of the UK. it will take effect incrementally, The national living wage is the with gradual rises until 2020 increased amount of minimum when it will reach £9 per hour. pay that all employees over 25 From 1 April 2017, the minimum are entitled to from 1 April 2016. hourly rate for employees aged The Government calculates and 25 and over increased to £7.50. sets this rate by liaising with the It will increase again on 1 April Low Pay Commission, which is 2018 to £7.83 per hour. Notably, an independent advisory body the national living wage does sponsored by the Department not apply to adult workers aged for Business, Energy and under 25.They are entitled to the Industrial Strategy. The rate is adult national minimum wage, based on median earnings. womblebonddickinson.com 1 In contrast, the Living Wage While advantages for employees Action Foundation states that its are self-evident, the Foundation In any increase of its wage bill, proposed living wage is calculated affirms that there are numerous an employer needs to weigh up on the basis of the cost of living advantages for employers who the cost the business will incur as in the UK, which is evaluated and sign up to their living wage policy: a result and how it will be funded. updated annually. In essence, The national living wage, which it is an aspirational target that • It is good for business: in an independent study increased hourly pay for those employers can voluntarily aged 25 and over from £6.70 to endorse and pay. Unlike the the Foundation found that over 80% of employers £7.20 in April 2016, represented Government’s calculations, the a considerable rise and raised Foundation recognises that who had implemented the living wage had seen an concerns over wage inflation. the cost of living differs across The national living wage affects the country and for this reason improvement in the quality of work their staff produced. business sectors differently: the rate is higher in London. the Financial Times estimated • Employers reported absenteeism The Foundation has criticised that paying the national living down by a quarter. the Government for not going far wage could cause wage bills to enough to bridge the gap between • 70% of employers believe increase by as much as 3.4% in the the minimum wage and the cost that the living wage policy accommodation and food sectors. has improved the face of their of living, suggesting that the Employers should start planning organisation in the eyes of national living wage is merely an for the incremental increases now the consumer, bolstering their improved national minimum wage. and considering how they will image as an ethical employer. cover the cost; they may decide The Living Wage Foundation to pass the cost on to consumers Over 4,800 organisations now or they may need to look at Founded in 2001 in London, after subscribe to the Foundation’s changing their staffing structure. a slow start and initial reluctance scheme. An employer that from employers, the Foundation has chooses to endorse the living now captured the attention of many wage policy and implement it in its FTSE 100 companies and even the organisation gains accreditation former Prime Minister, who stated and can benefit from increased that he supported it in principle. media exposure thanks to the The Foundation offers a voluntary efforts of the campaign. scheme for employers who wish to confirm their intention to pay the living wage.

Key contacts:

Christina Tolvas-Vincent Karen Plumbley-Jones Partner Managing Associate (Practice Development Lawyer) T: +44 (0)2380 20 8210 E: christina.tolvas-vincent T: +44 (0)1752 67 7903 @wbd-uk.com E: karen.plumbley-jones @wbd-uk.com

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