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National Living Wage comes into force

Luke Whitmore - Law on the Web

  1. 01 April 2016
  2. Employment
  3. 0 comments

Today sees the introduction of the National Living Wage (NLW), meaning employees aged 25 and over must be paid at least £7.20 an hour.

Announced by the government in last summer’s Budget, it is estimated that the policy will give 1.3 million workers a pay rise. The rate is expected to rise to over £9 an hour by 2020.

Those aged from 21 to 24 will still only be entitled to the existing National Minimum Wage of £6.70, with lower rates for under-21s.

The move has met with praise for increasing the income of a broad swathe of the working population, but there have also been criticisms.

Despite the name, the National Living Wage does not meet the definition of a “living wage” set out by the Living Wage Foundation, who originally popularised the term. Their living wage rate, paid voluntarily by some companies, is calculated according to the basic cost of living in the UK. The current rates are £8.25 an hour, or £9.40 for those living in London – both higher than the government’s rate.

The Living Wage Foundation commented that “the job is not done” in terms of dealing with low wages. Its director, Katherine Chapman, said: “For profitable business or those who see themselves as innovators and leaders, simply not breaking the law on pay is not enough. Many businesses want to aim higher.”

Some have also stated that it is unfair to pay workers under 25 a lower wage. TUC general secretary Frances O’Grady insisted: “Future wage increases must narrow the pay gap between old and young.”

Concerns have also been raised about the effect the increased wage may have on businesses, and whether they will be able to afford to pay staff the NLW. The Office for Budget Responsibility has estimated that 60,000 jobs will be lost by 2020 due to the move.

Whether or not the advantages and disadvantages of the National Living Wage will balance out – and whether the government should have gone further – is yet to be seen.

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