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National Minimum Living Wage to be introduced

Many employers may have been surprised to learn that the Conservative government plans to introduce a new national minimum Living Wage from April 2016. This will be operated by way of a “premium” on the NMW for employees aged 25 and over. It is set to be £7.20 per hour initially and is expected to increase to £9 by 2020.

Given the relatively small increments employers are used to in relation to the annual NMW increase, the Living Wage will represent a 50p increase on the NMW at the point it is introduced. This has the potential to significantly impact many businesses. In particular, sectors that traditionally pay their employees the NMW, rather than a salary, are most likely to feel the impact.

However, there is some good news for employers! In an attempt to offset the associated cost of this scheme, corporation tax is planned to be reduced to 19% in 2017 and then to 18% in 2018; and an increase of £1,000 to the employment allowance is proposed to assist businesses.

Employers will need to prepare in advance of these changes. It will be important for you to audit your workforce to identify eligible employees and update any contracts and associated documents dealing with pay. In terms of practicalities, payroll systems may need to be reviewed to ensure it is capable of adapting to the variable rates payable to different staff.

Please feel free to contact us on 0191 282 2880 for no obligation chat or email us if you require further advice.

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