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National Living Wage

What is the National Living Wage, how much is it and do I need to pay it?

National Living Wage

The National Living Wage was introduced in 2016 and applies only to workers over 25.

The aim of the National Living Wage is to allow over 25’s to earn enough to have a normal standard of living.

For workers under 25, the National Minimum Wage applies.

Changes to the National Living Wage April 2021

In November 2020, the current chancellor Rishi Sunak announced big changes to the National Living Wage in April 2021 which are likely to impact many businesses and how much they pay their employees.

Lower age threshold

From April 2021, the National Living Wage threshold will be lowered to workers aged 23 and over, instead of over 25’s. Anyone under 23, will be entitled to the National Minimum Wage, which differs based on age.

Increase in the National Living Wage

Not only does the age threshold drop from April 2021, the National Living Wage will also increase by 2.2%, from £8.72 per hour to £8.91 per hour. The National Minimum Wage also increases in April 2021.

This is good news for 23 and 24 year old workers who will receive an 8.7% increase in pay. However, for employers, it means you will need to be prepared for higher staff costs and budget accordingly.

 

Failure to pay National Living Wage

When a new National Living Wage rate comes into force, you must apply it to the first pay period on or after the enforcement date.

So, for example, if an employee is paid on the 10th of the month, every month, they’d receive the previous National Living Wage rate up until April 10th, and the new rate thereafter.

If you already pay your employees above the National Living Wage, there’s no need to increase their pay further, unless you’d like to.

If HMRC find that you have failed to pay your employees the National Living Wage they can send a notice of arrears and issue a financial penalty. They can also take employers to civil court with a maximum fine for non-payment of £20,000 per worker.

 

How Primed can help

Every year our employment & HR experts help businesses prepare for changes in legislation such as increases to the National Living Wage and National Minimum Wage, including updating employment contracts and changes to working hours.

Correct as of January 2021, normally National Living Wage increases take place each April.

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