Business minister warns firms not to fall “foul of the law” when it comes to Living Wage

On the day the statutory instrument is laid to write into law, the business minister sought to provide guidance for British companies before the 1 April deadline.

His four simple steps included: knowing the correct rate of pay of £7.20 an hour for staff 25 and over; finding out which staff are eligible; updating the company payroll in time; and communicating changes to employees as soon as possible.

“The government’s new National Living Wage will provide a direct best to over 2.5m workers in the UK – rewarding and providing security for working people,” he commented.

“I am urging businesses to get ready now to pay the new £7.20 rate form 1 April 2016. With just under four months left, there are some easy steps employers can take to make sure they are ready.”

Announced in the Summer Budget 2015, the government has plans to raise the Living Wage to £9 an hour by 2020. To offset the cost felt by employers around the UK, the re-elected Conservatives announced further cuts to corporation tax.

While the pay level will not become mandatory till 1 April, the government and the Department for Business, Innovation & Skills (BIS) wants steps to be taken now.

“By taking these measures, companies will be able to properly reward their staff and avoid falling foul of the law when it takes effect,” Boles warned.

Read more about the new National Living Wage:

• Embrace the positives of the Living Wage and deal with the negatives
• Businesses say yes to Living Wage but ask government to be cautious
• Firms must adapt or die in the wake of the National Living Wage

A new survey of 1,000 employers by BIS has found that 93 per cent of all bosses agree the new National Living Wage is a good idea. Furthermore, 88 per cent said it would make staff more productive, 83 per cent think it could foster greater loyalty and 82 per cent believe customers will be more likely to return if it was seen the company was providing the right pay.

However, not all reaction to the National Living Wage has been positive – as revealed by Real Business. In September, we reported that Costa Coffee would be implementing “selective price increases” to deal with the extra £15m or £20m it would have to find for staff pay rises.

CEO Andy Harrison said at the time: “I cannot rule out price increases. People are the company’s biggest single cost. We are supportive of a steady increase in the national living wage, but this is quite a big one – which came out of the blue in the Summer Budget.”

Furthermore, James Hick, managing director of Manpower, revealed: “Some employers may seek to reduce the extra costs by taking on more younger or self-employed workers, who are not entitled to the living wage.”

The BIS study also unearthed the discovery that only 45 per cent of firms had updated payroll to take account of staff aged 25 and over on 1 April 2016, with less then 40 per cent communicating with staff yet.

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