New National Minimum Wage rates

The National Minimum Wage (Amendment) Regulations 2015 came into force on 1^st October 2015. The Standard Adult Rate, Apprenticeship Rate and Accommodation Offset Limit of the National Minimum Wage have been increased further to the recommendations made by the Low Pay Commission.

The new rates are as follows:-

• £6.70 Standard Adult Rate (workers aged 21 and over).
• £5.30 Development Rate (workers aged between 18 and 20).
• £3.87 Young Workers Rate (workers aged under 18 but above the compulsory school age who are not apprentices).
• £3.30 Apprentice Rate (Apprentices).

From April 2016, employers need to note that there will be new rate of pay for workers aged 25 and over which will be known as the National Living Wage, the rate of which is expected to be around £7.20. Employers should not confuse this with the ‘Living Wage’ set by the Living Wage Foundation which is a campaign group promoting a voluntary minimum hourly rate calculated in accordance with the cost of living.

There are in fact an increasing number of large businesses who are voluntarily paying their employees a ‘Living Wage’. The current rates as set by the Living Wage Foundation are £9.15 in London and £7.85 elsewhere in the UK.

There is wide discussion over the benefits and disadvantages of paying lower paid workers a ‘Living Wage’. As well as the obvious increase in pay roll, employers also need to be mindful of potential disengagement of workers just above the rate of pay of the living wage who may be in management positions; the compressed pay differentials between staff and line managers may cause a decrease in morale for those in positions of greater authority. The potential benefits relating to the lower paid staff would however benefit the employer greatly: a lower level of staff turnover, with lower paid workers having higher levels of morale, lower levels of absenteeism and a higher level of motivation and productivity.