Preparing for wage increases

On 1st April 2016 the National Living Wage (NLW) will be introduced across the UK. The new rate will be initially set at £7.20 per hour for people aged 25 and over, which is 50p higher than the current National Minimum Wage (NMW). The plans for the introduction were announced last year in the Summer Budget and have since been evaluated and finalised.

The aim of the NLW is to help the government reduce welfare costs and promote a higher wage society. It is estimated that over a million people will benefit from the increased wage rate, with those earning the NMW seeing their pay rise by as much as £900 a year. The Government asked the Department for Business, Innovation and Skills (BIS) to conduct surveys when the new rate was announced to assess public opinion. It was found that 59% of people would be motivated by the wage increase.

The BIS is actively encouraging businesses across the UK to start preparing for the NLW. Each one will have to check their workforce to see who is eligible and ensure they pay the right rate. Alongside this they will have to set systems in place to keep track of the age of younger employees so they can be given the pay increase when they reach 25. Payroll systems will all need updating and any staff receiving the increase will need to be notified. This all adds up to a lot of work for employers.

From April 1st HMRC will have the authority to enforce the NLW in the same way they currently police the NMW. As part of this they will be able to initiate investigations when complaints are received, whether they are from individuals or third parties. They will look at records and ensure that the correct wages are being paid to all members of staff. Additionally HMRC will be able to secure any arrears that are owed.

At Cohen Accountants we are committed to helping businesses meet their obligations. We can offer advice about the introduction of the National Living Wage and help clients to prepare for it. With our help you can make the necessary changes, including to your payroll and book keeping. Please contact us for further information and to work with a qualified accountant in North West London.