Employers warned to prepare for introduction of National Living Wage

MacRoberts LLP has warned businesses to prepare for the introduction of the national living wage, or face being “named and shamed” by the UK government. They have also been warned to keep better records and prepare for higher expenditure, in order to afford to pay the NLW.

The new national living wage, introduced in April 2016, will require all employers to pay staff over the age of 25 a minimum of £7.20 an hour, increasing to £9 per hour by 2020. This will initially amount to a £910 per annum increase in the pay of people working full time at current national minimum wage. The implementation of the NLW could potentially affect all employers, particularly those in small businesses and those who have staff working in lower income roles in hospitality, retail and social care.

Complex rules exist about what pay and benefits are included when calculating NMW or NLW. For example, salary, bonuses and incentive payments are included, but the use of a company vehicle, provision of uniform, expenses and tips are not. The onus will be on employers to show they have paid staff the NMW or the NLW, therefore even small businesses will be expected to keep detailed records that comply with the new laws.

Katy Wedderburn, partner at MacRoberts LLP and specialist in employment law, said: “Many small companies might not realise that the changes in the law will affect them. They may have to revise their processes so they have sufficiently detailed records and information available for inspection.

“Companies have also been ‘named and shamed’ in the past for failing to comply with minimum wage regulations following the introduction of a naming regime in 2013. The UK government can make companies pay back wage arrears and fine up to £20,000. In the most serious of cases, employers could even be prosecuted.

“The government has been consulting about further penalties for non-payment of the NMW and the NLW. These include increasing arrears payments two fold and disqualification from being a company director for up to 15 years.”

Ms Wedderburn added: “Employers have to plan now. They must review their payroll so they are ready to introduce the changes. Business owners should prepare now, as there could be a major impact on their profits. In the worst case, some redundancies or reorganisation may be needed to cover the costs of the new national living wage.”