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Could you end up with more money in your pocket because of the new National Living Wage? Make sure you know what you’re entitled to be paid.
The new National Living Wage (NLW) came into effect on the 1st April and gave 1.3 million workers in Britain a pay-rise overnight. In this blog, we’re going to look at what the National Living Wage is and whether you could end up with more in your pocket because of the changes.
What is the National Living Wage?
The NLW is set at £7.20 per hour for workers over the age of 25, and the rate is due to rise over time. It’s planned that by 2020 the NLW should be £9 per hour.
The NLW was announced by the Chancellor George Osbourne in last summer’s budget, and is part of the government’s stated intention to try to create a high earning, low welfare country.
So, if you’re in full or part-time work, over the age of 25 and earning less than £7.20, you should have had a pay increase from 1st April.
Don’t get it confused
It’s important not to get the new rule confused with the Living Wage or the National Minimum Wage.
The National Minimum Wage changes depending on how old you are and whether or not you’re an apprentice and it sets out what you’re entitled to if you’re working under the age of 25. For example, if you’re working and between the ages of 21 and 24, then you’re entitled to £6.70 per hour.
The Living Wage is different again, and this is more about what employers should be paying their employees in an ideal situation. It is current calculated to be £8.25 outside London and £9.40 for workers in the capital. These figures are based on calculations that tell us the cost of living in this country – to give guidance on how much it costs to afford a reasonable standard of living. Unlike the Minimum Wage and the new National Living Wage, it’s voluntary, so employers don’t have to provide it.
Will employers stick to the rules?
As the NLW is a legal requirement it’s very likely that most employers will stick to the rules. A new team has specially set up by HM Revenue and Customs to prosecute employers who don’t.
There will be penalties for employers that fail to provide the NLW - they will have to pay 200% of the money that they owe, rather than 100% as it used to be. (This is capped so that no employer has to pay more than £20,000 for one employee who they failed to pay correctly). Employers can also be banned from being the director of a company for up to 15 years as punishment.
The possible downsides
Although it all sounds like good news, there have been some worries raised about the effect that the NLW will have on employers, particularly small businesses.
There may be some businesses that simply cannot afford to increase the amount that they pay their staff, if they happen to have a lot of employees over the age of 25, or they are experiencing cash-flow problems. The British Retail Consortium estimates that 900,000 jobs could be lost in the retail sector alone due to the change.
It’s also possible that more people may find themselves in the odd position of being paid different amounts for doing the same job, simply because some are over 25 and others are not.
All in all we hope that this pay rise means that those who are on lower wages will see themselves with a little more money in their pocket to help towards essential costs and put towards their savings. If you feel you struggle to make ends meet with your current wage, why not read our blog on ingenious ways to boost your income.
Whether or not you’ve benefited from the new National Living Wage, if you are struggling to make ends meet because you’ve got problem debts then remember that there are ways to deal with the problem. There are debt solutions designed to help with problem debt in a range of different circumstances, so why not reach out to us for help using the options to the left of the page and speak to someone today.
by Christine WalshBack to blog home