The Government announced this month its intention to make sure that the National Living Wage is paid to eligible employees from April 2016. David Cameron,writing in the Times newspaper said “The National Living Wage will only work if it is properly enforced”, while Employment Minister Nick Boles told the BBC the government is “very keen to step up enforcement”.
The current National Minimum Wage rates, range from just £2.73 per hour for apprentices, up to £6.50 per hour for over 21s, although this will rise in October to £6.70 per hour. The new National Living Wage will be payable to employees over aged 25 from April 2016 at a rate of £7.20 per hour, rising to £9.00 by 2020.
Employers who fail to pay National Minimum Wage rates have always faced potential fines and enforcement from HMRC, but today’s announcement confirms that the budget for enforcement will be doubled and the fines employers may face will also be increased. HMRC is currently focusing on social care, hairdressing and retail, which are all sectors where lower pay is the norm.
The Government also intends to create a new offence of aggravated breach of labour market legislation. A new Director of Labour Market Enforcement and Exploitation will be created to oversee enforcement of the National Minimum Wage, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority.
Industry remains divided as to whether the new National Living Wage will be a good thing, with Justin King, the ex-Chief Executive of Sainsbury’s in particular, discussing whether or not higher wages will have a positive effect on the economy. Concerns are also being raised as to why the increase is targeted at the over 25 age group only.
The new rates will also become payable at the same time that smaller businesses will be required to start providing pensions to employees under the auto enrolment initiative. This will force employers to pay an initial 1% of salary into a pension scheme, with rates rising to 3% by 2018.