31 March 2016, 09:50 AM
  • The National Living Wage (NLW) has come into force, meaning that employees aged 25 and over will be paid at least £7.20 an hour
National Living Wage Now In Operation

Employees aged between 18 and 24 will continue to be paid the National Minimum Wage of £6.70 an hour.

An estimated 1.8 million workers will benefit from the NLW, while there are 1.3 million workers currently paid the National Minimum Wage.

The National Living Wage was announced by George Osborne, Chancellor of the Exchequer, as part of his 2015 Budget, and he plans to increase the rate to at least £9 per hour by 2020.

The decision was made without consultation with the Low Pay Commission, and there are fears that employees could lose their jobs due to their employers being unable to afford to pay the higher wages.

According to The Office of Budget Responsibility, 60,000 jobs could be lost as a result of the National Living Wage being enforced.

Ian Willard, head of personnel at Partridges said, “I broadly welcome the principle. The starting point should be at least 21 (pension auto enrolment starts at 22), although 18 would be better. Restricting to over 25 is unfair and reinforces growing wealth gap between generations.

“The establishment of the idea highlights the discrepancy between national and London rates and thus will put further pressure on London-based businesses.

“I suspect the impact will be largely neutral in the medium term. National Living Wage comes at the same time as auto enrolment of pensions is extended and rates increased. I don’t see retail jobs being cut in the short term but it will inhibit further growth in the sector.

“Firms will also put brakes on training and do no more than minimum compliance with pension provision. They will look at more part time and zero hour contracts and “gigging employment”. Enhanced payments and overtime will be reviewed, ie cut. Employment costs are increasing as an overall share of business costs.

“There is a greater chance of job insecurity and reuced career expectations and this is the trade off for higher payroll bills.”

Jane Thornber, general manager at Fodder said, “We gave our staff a pay increase above minimum wage back in January. We also gave this to everyone aged 18 and above as we didn’t think this was fair to only apply it to staff aged 25 and above. After all, they are doing the same tasks and have the same skills.

“We have done this without putting our prices up to the customer, therefore this has eaten into our margins. We haven’t as yet had price increases from our suppliers but if we do we may have to consider increasing our selling prices.”

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