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How changes to the National Minimum Wage could transform pay scales

  1. Since 1 October 2016
  2. What the new changes mean for employees
  3. What the new changes mean for employers

The increase in the National Minimum Wage (NMW) in October 2016, and the introduction of the National Living Wage (NLW), could mean employers now need to take a fresh look at pay structures within their organisation. The Government's Autumn statement in November 2016 also signalled a growing commitment to enforce Minimum Wage legislation and future rises.  


As the NLW is introduced, supervisors may potentially find themselves earning the same as the people they are supervising. Over the next 12 months, this could have far-reaching consequences for employee relations, employers and the way jobs are evaluated.

Employers may now face the prospect of a workplace in which skilled and unskilled workers find themselves on similar pay grades.

In future, employers may need to find a fresh approach to pay structures that makes every member of staff feel valued.


Since 1 October 2016:

  • Employees on lower rates of pay benefitted from an increase.
  • In some cases this and the introduction of NLW may have put them on a higher pay scale than their supervisors.
  • Supervisors may subsequently earn less than their team members.
  • Employers may need to re-examine and re-assess their current pay scales and structures to reflect the new increase.
  • In the Government's Autumn statement, further increases were announced for April 2017 and beyond.

What the new changes mean for employees

On 1 October 2016, new rates were introduced for the National Minimum Wage.

These rates vary by age.

For under 25s: the National Minimum Wage

The National Minimum Wage only applies to workers and employees aged between 16 and 24. It's the legal minimum hourly rate that people of these ages must be paid.

The rates are now:

  • £6.95 per hour - 21-24 yrs old - (previously £6.70)
  • £5.55 per hour 18-20 yrs old - (previously £5.30)
  • £4 per hour - 16-17 yrs old (previously £3.87)
  • £3.40 - apprentices under 19, or 19 or over, who are in the first year of apprenticeship (previously £3.30)

Rates from April 2017 will be:

  • £7.05 per hour - 21-24 yrs old
  • £5.60 per hour - 18-20 yrs old
  • £4.05 per hour - 16-17 yrs old
  • £3.50 - apprentices under 19, or 19 or over, who are in the first year of apprenticeship 

Find out more about the National Minimum Wage and National Living Wage.

For over 25s: the National Living Wage

The National Living Wage was introduced on 1 April 2016 for the over 25s. The threshold will be reviewed in April each year, with the objective of reaching more than £9 an hour by 2020.

The current National Living Wage rate is £7.20 per hour. In April 2017, it will rise to £7.50 an hour. This will mean an extra £1400 a year for full-time workers previously on the National Minimum Wage.

If an apprentice is aged 25 or over and is not in the first 12 months of their apprenticeship, they are entitled to the National Living Wage.

Employers must follow these rules. Paying a lower amount, or falsifying records, can result in the same penalties as for breaches of National Minimum Wage regulations.


What the new changes mean for employers

Some employers already voluntarily pay the higher National Living Wage to all workers and employees in low-wage roles. However, almost all employers will need to consider what these changes could mean for pay-grades within their organisation.

Whilst there are many things to consider, there's one thing that can't be ignored: if an employer doesn't pay a worker or employee the pay to which they are legally entitled, the consequences can be serious. It can range from a penalty of 200% of the amount that's owed to being banned as a company director for up to 15 years.

The government also recently named 200 employers who have not paid the National Minimum Wage.


More about the minimum wage and fair pay legislation

 


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