Are You Paying the National Living Wage?

The new National Living Wage (NLW) comes into force today (April 1). The Federation of Small Businesses (FSB) has called on small firms to make sure they act on this new legal requirement to avoid heavy penalties.

The NLW, not to be confused with the voluntary Living Wage set by the Living Wage Foundation, is a new compulsory minimum wage of £7.20 per hour for the over-25s. The Government has set a target for the NLW to rise to the equivalent of 60% of average earnings by 2020. Based on the latest projections, this will mean the NLW will increase to approximately £9.15 per hour in 2020, although this is subject to change.

FSB believes the Low Pay Commission, the independent body that advises Government on the minimum wage, should be free to deviate from this target if it becomes apparent that the economy cannot afford it.

While many small firms already pay their staff above NLW and will not be affected, others will find it a significant challenge and face difficult choices in order to pay for the higher wage bill, said the FSB.