News & Views

Government releases new regulations on the National Living Wage

BY Daniel Gorry
Employment law
BG Purple

As most employers are aware, the Chancellor announced in July's Budget that the UK Government would introduce a new statutory wage regime entitled the "National Living Wage" to take effect from April 2016

The new regime is set to replace the current National Minimum Wage scheme and should not be confused with the pre-existing Living Wage, a higher-than-statutory rate recommended by the National Living Wage Foundation. The Government's NLW will begin at £7.20 per hour for workers over the age of 25 and is set to rise to £9 per hour by 2020.

Initially it wasn't clear whether the new regime would follow the rules of the existing NMW scheme (ie. whether the NLW is simply a rebranding exercise) or whether the rules would be overhauled. The Government has now released the National Minimum Wage (Amendment) Regulations 2016 which confirms that, aside from a few key changes, the existing NMW rules will remain in place.

A new Regulation 4A has been introduced into the NMW Regulations which sets out the new rate for over 25s (the existing NMW rates remain in force for those under 25). In addition the NMW Act 1998 has been amended to double the financial penalty for employers who fail to pay the correct rate from 100% to 200% of the underpayment due to each worker.

The full effect of the new NLW on UK business remains to be seen at this stage. However, employers can now begin preparing for its arrival in 2016 with a little more certainty.

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