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Everything you need to know about the National Living Wage

With the UK National Living Wage coming into effect from this week, it’s time to start considering whether the new changes will affect you and your weekly pay. Over the coming 12 months, UK workers over the age of 25 will get a pay rise of 50p on the minimum wage of £6.70 per hour, taking hourly pay to £7.20 an hour.

Whilst this is likely to increase the minimum wage of the average person by around £20 per week, the minimum wage for those under 25 remains at £6.70 an hour, £5.30 for under 21-year-olds and £3.87 for under 18s.

That’s a vast improvement right?
Yes and no! Although around 1.3 million people in Great Britain are expected to get a pay rise on April 1st, a number of Economists have warned that the new policy may harm those the increase is attempting to help, as it could cost those in lower-skilled roles their jobs.

When asked about these consequences, Nobel Prize winning economist Sir Christopher Pissarides stated.  “I think it is going to be a threat. There are going to be job losses.” He’s not wrong, as the Office of Budget Responsibility has calculated that by the end of 2020 around 60,000 jobs could go.

Whoa there, why will cost people their jobs?
The main reason is that in general it will cost employers more to pay the living wage increase. We’ll also see over the next 4 years that the cost of wages for businesses will lead to a 0.4% cut in the amount of hours available, resulting in no less than 4 million fewer working hours per week in the UK. These cuts will hit the lowest paid the hardest so the increase in living wage may not bring a massive benefit.

But won’t higher pay be better for everyone?

Yes, but it will not benefit everyone. Initially under 24’s are excluded from the new living wage and will still receive the original £6.70 per hour. In addition to this, apprentices aged 16 to 18 and those aged 19 or over in their first year of work will only be given a minimum of £3.30 an hour. That’s almost £5 less than the £8.25 required to live in the UK as calculated by the Living Wage Foundation.

So what’s the difference between the wage they’ve calculated and the actual National Living Wage?

Even though the minimum wage amount that’s been introduced is called the National Living Wage, this higher amount is simply a statutory minimum wage. Before the National Living Wage term was introduced by the current Government, it was always called the minimum wage and this is significantly lower than the Living Wage calculated by the Living Wage Foundation. This is set independently and is based on the cost of living and is now set at £8.25, and £9.40 in London. Hope that helps!

Where can we go if we need more information about how this affects us?
Either go to your local Citizens Advice Bureau or give us a call on 0330 111 5353 where a member of our team will be able to help you with everything you need to know.

 

 

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