First announced in the 2015 Summer Budget, the compulsory National Living Wage will take effect from 1 April 2016. This is set to start at £7.20 an hour and will rise to £9 an hour by 2020, replacing the current £6.50 minimum wage for workers aged 25 and over. With more people in the UK on low pay compared to other advanced economies, the introduction of the National Living Wage is expected to boost the wages of 6 million people.
Although several large employers undertook to increase their pay before the new rules take effect, the Office for Budget Responsibility predicts that 60,000 people will lose their jobs as a result of the changes as employers will hire more workers under the age of 25 who can still be paid at the lower level of the minimum wage. It will be interesting to see if a trend is discernible in an amount of increased age discrimination claims.
This change will represent a major challenge to many smaller employers as well as those in certain sectors such as retail. Recent research from the Resolution Foundation also highlighted the impact this will have on certain regions of the UK with the cities of Sheffield, Nottingham and Birmingham particularly affected due to the percentage of low pay workers in these areas. For the affected workers this will bring a welcome boost in income but for their employers it will present several challenges of not only how to deal with their increased costs but also how to invest in new ways of working, training and equipment which can improve productivity levels.
The Department for Business, Innovation and Skills has published a guidance on how to calculate the minimum wage and more. View the guidance here.
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