James Townsend
Posted on 4 Nov 2015

National Living Wage – too far, or not far enough for retailers?

In his July 2015 budget, Mr Osborne announced that with effect from April 2016, a premium will be added on to the 'National Minimum Wage' (NMW) for all workers aged 25 and over.

This premium termed the 'National living Wage' (NLW), will give an effective pay rise of 50 pence per hour to every UK adult worker aged 25 and over who receives NMW and will take that worker's rate of pay to £7.20 per hour.

Workers aged 21-24 will continue to receive NMW and will not be entitled to the NLW premium.

Following his budget announcement, commentators have suggested that Mr Osborne is seeking to make political capital out of successes made by the independent 'Living Wage Foundation', which at the time of Mr Osborne's announcement advocated employers pay all their staff and contractors an hourly 'Living Wage' (LW) of £9.15 in London and £7.85 in the rest of the UK

Retailers will be very much aware of the press attention and publicity that was generated in September 2015 when Lidl publically announced that all of its staff would be paid a minimum of £9.35 per hour in London and £8.20 in the rest of England, Scotland and Wales.  In other words, at that time, more than NLW and LW.  

Lidl's competitors were of course quick to point out that although Lidl's headline basic rate might look impressive, it is important to consider the full package of benefits on offer by an employer and not simply the headline basic rate:  In any case, Lidl sent out a powerful and positive message to the retail world with its announcement. 

The minimum level at which staff should be paid once again came sharply back into focus at the beginning of November 2015, with the Living Wage Foundation announcing a further increase to the recommended LW to £9.40 an hour in London and £8.25 per hour in other parts of the UK.

Whereas it remains open to retailers to consider whether they wish to become an accredited partner of the Living Wage Foundation and pay a living wage, payment of NLW from April 2016 will not be voluntary.

Any employer that fails to keep appropriate pay records, fails to pay its workers NMW, dismisses and / or treats workers to their detriment for matters associated with NMW, can face criminal prosecution, public naming and shaming, as well as possible claims from aggrieved workers in the County Court or Employment Tribunals.

Right or wrong, the introduction of NLW in April 2016 will take the governments stated policy objectives one step closer: "The government wants to move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society" - Department for Business Innovation & Skills (BIS), Policy Paper, National living Wage (NLW), 24 August 2015. 

For more information please contact James Townsend, head of the London Employment team on james.townsend@michelmores.com or 020 7659 4641