A national living wage: an important but complex shift in policy

Costa Coffee said it expected to increase prices to counter cost of the NLW. Photo: Jacob Carter/REX Shutterstock
Costa Coffee said it expected to increase prices to counter cost of the NLW
Photo: Jacob Carter/REX Shutterstock

Consultant editor Darren Newman examines the complexities arising from the Chancellor’s announcement of a “national living wage” for workers aged 25 and over and highlights the potential for challenges on age discrimination grounds.

The national minimum wage is about to be transformed. Since it was introduced in 1999, Government has shied away from setting the actual rate at which it is paid – leaving it to the independent Low Pay Commission to make its recommendations based on the need to avoid damaging the economy or prospects for employment.

With the new Budget announcement of a “national living wage”, however, the Chancellor has placed the issue firmly in the political domain. “Britain deserves a pay rise”, he says, “and Britain is getting a pay rise”.

The Low Pay Commission is being given a new remit. It will not advise on what the level of the new national living wage should be, but on how quickly it should reach the Government’s aim of being 60 per cent of median earnings.

It will start at £7.20 per hour in April 2016 and is projected to reach £9 per hour by 2020. We should not underestimate the importance of this shift in policy.

One complication of the Chancellor’s announcement is his use of the phrase “national living wage” rather than “national minimum wage”. This is not mere window dressing.

It appears that the national living wage will not simply be a new higher rate for the minimum wage, but will be achieved through a premium for workers aged 25 years and over. This seems needlessly complicated.

Continue reading the full analysis on the new national living wage on XpertHR…

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