Are you ready for The Living Wage 2016 – it is compulsory from 1st April!

Posted on 24th March 2016 by Streets -  What's trending?

Image to represent Are you ready for The Living Wage 2016 – it is compulsory from 1st April!

The new hourly rate will be £7.20 with the Low Pay Commission recommending future increases to as much as £9.00 by 2020. National Minimum Wage conditions will still apply to eligible workers who are under 25 years old.

The concept of a ‘living wage’ has its roots in many cultural and philosophical traditions but more recently a campaign was launched by a group of parents from London’s East End called London Citizens who were finding it difficult, despite working two or more minimum wage jobs, to earn a living and find time for family and community life.

After a number of high profile campaigns from the London Citizens, in 2005 the Greater London Authority established the Living Wage Unit to calculate the London Living Wage.  This has since grown nationally - with many trade unions and community organisations taking up the baton - to the point where it has now been adopted by George Osborne and made compulsory from this April 2016.

Businesses and organisations should make sure that the new compulsory National Living Wage is clearly visible on their financial radar, and budget accordingly. Although it will only apply to those employees aged 25 and over, if affected, there will be a significant impact in terms of cost for most SMEs.  In particular the new National Living Wage is likely to impact on employers of those working in care, retail, leisure, hospitality, food processing and horticulture.

What do you need to do as an employer?

From 1st April 2016, you will need to ensure that you are paying the National Living Wage to all those staff who are entitled to it. Certainly it is anticipated that the National Living Wage will be enforced as strongly as the current National Minimum Wage – with severe penalties and repercussions for those that don’t comply.  You may need to check that you know who is eligible in your organisation - this can be done simply by visiting You will also need to update your payroll processes and procedures, or if you use an external payroll bureau service, ensure that they are aware of any changes to employees pay.

At the same time you might like to take the opportunity to check that employees under 25 are earning at least the National Minimum Wage.

The broader impact of the introduction of the National Living Wage could give rise to wage pressures across the board as others seek the benefits of increased pay. However, given the pressures on small businesses, in particular to absorb the cost of the introduction of Workplace Pensions through Auto-enrolment, many employers may not, unless they are doing well, seek to offer pay awards over and above any already budgeted. Overall the introduction of the National Living Wage, unless you have a sizeable workforce entitled to the new rate, is likely to be absorbed. It is always worth considering areas around improved productivity, cost control and margin enhancement to ease the burden.

No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.


The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.

Expert insight and news straight
to your inbox

Related Articles

Budget 2024: Changes to the Non-Dom Regime and their Implications

In the wake of the Budget 2024 announcements, significant changes to the UK's non-domiciled individual (non-dom) regime are on the horizon, with scheduled implementation for 6 April 2025. However, uncertainties loom, especially considering the potential shift in political power after the next General Election. While the outlined reforms ...

How do you avoid financial forecasting that ends up with rain instead of sunshine?

Financial forecasting can often feel like the weather forecast, financial predictions not always being as rosy as planned, or in many cases, as hoped - a bit like the weather whilst sunshine is predicted rain all too often can be the outcome.  Whilst many businesses will look to ...

Working Capital Cycle

The longer the working capital cycle, the more time it takes for your business to get a robust cash flow. It’s good practice for businesses to manage their cycle by looking at each step where possible. This could be by selling stock or product quicker, collecting monies owed ...

You might also be interested in...