National Living Wage Brings Forward Compliance Concerns

By Sam Thomas | 1st June 2016 | 14 min read

BLOG | The National Living Wage's introduction in April, replacing the minimum wage for those over 25, has brought auto enrolment compliance concerns.


The National Living Wage

Last month saw the introduction of the National Living Wage of £7.20 across the UK for people currently on the minimum wage, and aged over 25.

The Living Wage was announced last summer by the Chancellor George Osbourne and it’s estimated that around 2.6 million workers in the UK will see a direct benefit as a result of the Living Wage’s introduction. This means that nearly 3 million people could see themselves become eligible for a company pension scheme, and will need to be assessed and enrolled if required.

It’s also important not to mix up the National Living Wage, with the National Minimum Wage. For the National Minimum Wage, the amount is currently set at £6.50, it will rise by 20p to £6.70 on October 1st for 21 to 24 year olds. For 18 to 20, the amount is set at £5.30, under 18 is set at £3.87, and apprentices should be paid a minimum of £3.30.

The Impact on Auto Enrolment

At present, the conditions for auto enrolment eligibility are as followed:

- Aged between 22 and the State Pension Age

- Earning over £10,000 per year

- Based mainly in the UK

The rise in wages that the National Living Wage brings with it, means that for a worker aged over 25, and earning minimum wage, they would receive an additional 50p per year.

The effects on workplace pensions is something that every business must now consider. As we know, employees must be assessed for automatic enrolment eligibility each pay period, and if a worker meets the requirements, they must be automatically enrolled into your company pension scheme.

Your business may find that your employees who earned under the required £833.33 per month before April, may now become eligible for your company pension scheme – if this happens, your business has a legal requirement to communicate this to them and enrol them.

How IRIS Can Help

For many businesses, the time needed to assess every work each pay period is one of the most strenuous requirements of auto enrolment. Fortunately, we have a solution – The IRIS AE Suite™.

The IRIS AE Suite™ integrates with your existing IRIS payroll software, and automatically calculates each employee’s eligibility for pension enrolment every time you run your payroll. This is done behind the scenes to save you time and effort, and other aspects such as communication are also taken care of by the Suite. As the software performs the calculations automatically, changes in your payroll, for example the introduction of the National Living Wage, are taken into account and the IRIS AE Suite™ would automatically enrol any of your employees who may now be eligible. The software provides what we call a ‘zero additional effort’ approach to auto enrolment.

Why not book a free, no-obligation product demonstration to see how the IRIS AE Suite™ can help your business manage automatic pension enrolment?

Book my IRIS AE Suite product demo