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Introduction of the National Living Wage – What does it mean?

01 April 2016, heralds the introduction of the National Living Wage (NLW) and according to the Government, it will mean an increase in pay for 900,000 women and £500,000 men. The National Living Wage will apply to all working people aged 25 and over and the rate is at £7.20 per hour. The rate will be reviewed annually by the Low Pay Commission, who will then make recommendations as to any future increase.

The NWL is different to the National Minimum Wage (NMW), which applies to those aged under 25. The current National Minimum Wage is also reviewed by the Low Pay Commission, but is subject to change annually in October. The current rates are as follows:

For workers aged between 21 and 24 the rate is £6.70 per hour.

For workers aged between 18 and 20 the rate is £5.30 per hour.

For workers under 18 the rate is £3.87 per hour.

For apprentices the rate is £3.30. The ‘apprentice’ rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the minimum wage for their age.

What does the NWL mean for employers?

Although the NWL will come into force on 01 April, employers will only have to start paying the new rate from the first full pay reference period after the 01 April.

The penalty for non-payment of the NWL will be 200% of the amount owed, unless arrears are paid within 14 days.

The maximum penalty that employers could face will be £20,000 per worker. Failure to pay will result in the employer being disqualified as a company director for up to 15 years.

If you have any queries about how the above changes might affect your business, please contact our Employment Department.


Raj Dhokia: r.dhokia@fgdlaw.co.uk