Pay restructuring – Further Increase of the Minimum Wage
A new minimum wage of £7.20 per hour will be introduced next April (2016) for all working people aged 25 and over, the Government announced in its summer budget.
The “national living wage” (NLW) will be compulsory and the Low Pay Commission (LPC) will recommend future rises, with the Government aiming for it to reach £9 an hour by 2020.
The adult national minimum wage currently stands at £6.50, rising to £6.70 in October. For those aged 25 and above, their hourly rate will rise to £7.20 in April 2016, an 11% increase on the current mandatory pay rate.
This will add pressure to increase pay for other employees to maintain pay differentials or to ensure that new staff are not paid more than qualified or experienced existing ones. It will also add complications for those employers who stick to the age-related minimum wage bands. At the moment the adult rate is payable to those aged 21 and over, so employees aged 21 to 24 are likely to feel upset that they are not being paid the same as colleagues aged 25 especially if they are doing the same job to the same degree of competency. This may cause employees to become demotivated and less productive as a result, so it is important to plan ahead now to try to avoid this situation.
From April 2016 the wage bands will therefore be as follows:
* The rate for 25 year olds and over will be £7.20 per hour.
* The rate for 21 to 24 year olds will be £6.70 per hour.
* The rate for 18 to 20 year olds will be £5.30 per hour.
* The rate for 16 to 17 year olds will be £3.87 per hour.
* The apprentice rate will be £3.30 per hour.
Other changes in the summer budget mean that from 2016, the Employment Allowance, will be increased by 50% to £3,000. This means that employers will not have to pay the first £3,000 of their National Insurance dues.
If you are concerned about the implications of this pay rise and how it may affect your business, please get in touch.
Posted on 19 Nov 2016