The National Living Wage begins today, is your business prepared?

By Sam Thomas | 31st March 2016 | 15 min read





The new mandatory National Living Wage comes into effect today, businesses who employ people aged over 25 should now be paid at least £7.20 an hour.

The new rate was announced last summer by the Chancellor George Osbourne, he states that around 2.5 million workers would get the direct pay increase.

We covered the National Living Wage in an earlier blog series, where we reviewed the top 5 issues which we predicted could affect businesses the most in 2016. Has your business prepared for its introduction when it comes to workplace pensions?

The Living Wage Foundation, which has lobbied for change but does not set the amount, has welcomed its introduction, but still urged businesses to pay more than the statutory minimum. They had previously campaigned for the figure to be closer to £8.25 an hour, and £9.40 an hour inside London, to be more in line with the Voluntary Living Wage, the amount businesses are encouraged to pay workers, but not legally required.

It’s important not to confuse the National Living Wage and 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.

Also, be aware that penalties are in place for non-compliance with the National Living Wage, from anywhere between 100 to 200% of the money owed, with a maximum of £20,000 per worker. Employers found guilty can also be disqualified as a company director for up to 15 years. A new enforcement team has been set-up at HMRC to identify non-compliance and pursue criminal prosecutions.

As we know, auto enrolment is now in full swing, and because of the National Living Wage, businesses who had no eligible employees may now find themselves in a position where the increase in wages has pushed an employee into eligibility, and the business must then act.

The important thing to remember is that employees must be assessed for auto enrolment eligibility every pay period. If for example, an employee was to receive a large overtime or bonus payment, and this meant that they crossed the earnings threshold, they would be automatically enrolled indefinitely.

Remember that The Pensions Regulator estimate that up to 570,000 small businesses are expected to stage for auto enrolment over the next 12 months, adding to the 100,000 who have already staged. Whether your business now complies with the workplace pension reform or you’re due to stage in the future, it’s critical to ensure that you are assessing your workforce regularly to avoid mistakes.

It’s important to have a payroll software solution in place which can help ensure that your business calculates employee pay, and auto enrolment eligibility on a weekly or monthly basis. Non-compliance is not an option, as The Pensions Regulator have a range of powers to use to force non-complying businesses to enrol their eligible staff; powers such as Statutory Notices, daily and weekly fines, and even court action.

IRIS are proud to offer the UK’s most comprehensive auto enrolment solution, the IRIS AE Suite™, developed through close relations with pension providers, The Pensions Regulator, as well as customer feedback, the IRIS AE Suite™ automatically assesses your workforce at the touch of a button each time your payroll is run, helping your to identify changes month-to-month in auto enrolment eligibility.

Book a free, no-obligation product demonstration today and see how the IRIS AE Suite™ can help your business manage the National Living Wage, and auto enrolment.

Book my IRIS AE Suite™ demo