If you don’t employ people
age 25 and older who are paid below £7.20 an hour, you can stop reading now. But
for everyone else, read on!
“The
government’s new National Living Wage will provide a direct boost to over
two-and-a-half million workers in the UK – rewarding and providing security for
working people. I am urging businesses to get ready now to pay the new £7.20
rate from 1 April 2016. With just under 4 months left, there are some easy
steps employers can take to make sure they are ready. By taking these measures,
companies will be able to properly reward their staff and avoid falling foul of
the law when it takes effect.”
Business Minister Nick Boles, December 2015.
Here are our recommendations for the
easy steps you can take as an employer to make sure you’re ready:
Find out who in your business will need to receive an hourly rate
increase to bring their pay to £7.20 an hour. This will involve analysing the
age profile as well as current hourly rates - the legal requirement to pay
£7.20 an hour only applies to people age 25 and older.
Identify whether the increase to
£7.20 an hour will give enough of a
wage gap between the lowest paid and the more skilled people. It could
prove problematic where, for example, there is a 21-year-old supervisor in a
team earning less than their more junior colleagues. Look carefully at rates
just above the lowest level, as well as the distribution of pay across the
organisation as a whole.
Make a policy decision about whether your company will ignore the
age banding and pay everyone at or above the National Living Wage. Perhaps
you think it’s too complicated to have people doing the same job paid different
rates just because of their age. Or you're reluctant to create a two-tier
workforce. There's a possibility that the age banding will be challenged as
a breach of European law on age discrimination further down the line–
although so far this hasn't happened.
If you use agency temps whose take-home pay is the National Living Wage,
the 25 year olds and over will have to be paid more too. Take this into account
in your costings.
Quantify the increase in your total employment
costs. Plan ahead for it rising to £9 an hour by 2020.
Consider the different ways your
company could offset the increased
wage bill and plan ahead. Some decisions you take will need action
starting well in advance to produce the necessary cost saving.
This is what other employers are
considering to offset the extra costs, starting with the most popular plan:
·
improve
efficiency and staff productivity
·
cut
overtime and bonuses, or reduce allowances or out-of-hours payments
·
reduce
profits to absorb the outlay
·
raise
prices
·
reduce
the number of employees via redundancies or slowing down recruitment
·
plan
to take on more workers under the age of 25 in future
This is an opportunity to step back,
consider your strategy and take a
long-term view. Do you need to reskill people, to switch roles around?
Consolidate some roles so there will be fewer people on the bottom rate and
more with higher skills and higher pay? Giving low-paid staff more
responsibility will also be beneficial in the long term by improving retention
and productivity.
Communicate the upcoming changes to staff
affected. Send terms of employment change letters to everyone
receiving an increase by the end of March.
Ensure the company payroll is updated with pay
changes in time for 1 April.
Ensure your record systems are able to track each employee’s age and pay the
right legal minimum after 1st April.
If you would like help
and advice with calculating your additional costs, with planning to offset them
and with the policy implications, plus communicating the change to your
employees, contact The Human Resource on 07884 475303 or enquiries@thehr.co.uk
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