From 1st April 2016, employees aged 25 and over will be entitled to a new minimum hourly pay rate of £7.20 per hour. The so-called National Living Wage (NLW) is an increase of 50 pence per hour to the current National Minimum Wage (NMW) rate of £6.70.
One-in-four UK firms will be affected by the NLW, with a number having to overcome “significant productivity challenges” to cope with the new rate, according to a new report by the Social Market Foundation and the Adecco Group.
By paying the NLW to over 25-year-olds, employers will be faced with potential “discrepancies” in rates of pay for younger workers, according to the report.
Nida Broughton, chief economist, the Social Market Foundation, said: “The low stock of skills amongst those affected, and the relative lack of access to in-work training, means that businesses and the Government will have to act to make sure that workplace productivity rises alongside the new regulated wage.
“If businesses can increase productivity there is less likely to be a risk of higher unemployment as a result of the introduction of the national living wage, and workers will be more likely to benefit.”
Alex Fleming, managing director, Adecco Group UK and Ireland, believes the NLW can bridge the gap between “wage inequality” but will be a significant challenge for firms to implement the new regime and simultaneously boost productivity.
“The challenge for businesses, particularly in sectors including retail, wholesale and hospitality, will be in mitigating the impact of the new rate across their workforce and boosting productivity to avoid job losses,” said Fleming.
“Businesses should consider training as one of the best ways to respond. Many workers eligible for the rate are low-skilled with little further education beyond their GCSEs.
“This research shows the value of investing in training and skills for long-term. It is crucial that employers consider what these changes mean for them, rather than relying on a one-size-fits-all analysis of any potential impact.”
HMRC’s free webinars
For those wishing to find out more about the NLW changes and what needs to be done ahead of 1st April, HMRC is putting on four free live webinars:
Thursday 18th February 12pm - NLW & NMW for employers
Thursday 18th February 2pm - NLW & NMW for employers
Friday 26th February 11am - NLW & NMW for employers
Friday 26th February 2pm - NLW & NMW for employers
To take part in any of the HMRC webinars simply sign up and provide your name and email address where a link to attend will be sent. Attendees will be allowed to ask questions during each webinar session.