The difference between National Living Wage and Living Wage

blog-publish-date

24 Nov 2016

blog-read-duration

As an employer, it is important to understand the difference between the National Living Wage and the Living Wage. Clare Parkinson, Reward Business Manager at Croner explains.

Legal v Voluntary

The National Living Wage (NLW) is a requirement by law. Introduced in April 2016, it requires employers to pay a minimum wage for workers over the age of 25, which is currently set at £7.20 per hour, but will rise to £7.50 per hour in April 2017, as stated in the Autumn Statement. The Living Wage (LW), however, is set by the Living Wage Foundation and voluntarily adopted by employers who wish to pay their staff over and above the legal minimum. It is set every year by independent academics, and is influenced by factors such as accommodation, travel, food, holidays, and extras (such as birthday presents). The LW covers workers aged 18 and over, with two rates: one for London Living at £9.75 per hour, and one for the remainder of the country, which is £8.45 per hour. To date, over 2,500 employers have voluntarily signed up to the LW, with a spectrum of enticing reasons for doing so.

Risks of not paying the minimum amounts

It is against the law for employers to pay workers less than the applicable National Minimum or National Living Wage rate. If an employer doesn’t pay the right rate then the worker(s) can make a formal grievance against their employer. This complaint will be made to HMRC who will undertake an investigation. If HMRC find that an employer hasn't paid at least the National Minimum Wage, they can send a notice of arrears plus a penalty for not paying the correct rate of pay to the worker. With the introduction of the National Living Wage, the penalty for non-payment is 200% of the amount owed, unless the arrears are paid within 14 days. With a maximum fine for non-payment up to £20,000 per worker. Employers who fail to pay will be banned from being a company director for up to 15 years. In addition, the Government regularly issues a ‘name and shame’ notice of those employers who fail to pay the National Minimum and Living wage.

Free to Download Employer Resources

  • Pay Awards & Forecast (September 2018)

    FREE DOWNLOAD

    Pay Awards & Forecast (September 2018...

    Read Croner Reward's expert settlement and forecast report for September 2018

    Read more
  • Sample Health & Safety Policy Statement

    FREE DOWNLOAD

    Sample Health & Safety Policy Stateme...

    Here we’ve included a free sample Health & Safety Policy Statement that UK business owners can refer to.

    Read more
  • Pay Awards & Forecast (June 2018)

    FREE DOWNLOAD

    Pay Awards & Forecast (June 2018)

    Read Croner Reward's expert Settlements and Forecasts report for June 2018

    Read more
  • How Much Does Employee Turnover Cost Your Business?

    BLOG

    How Much Does Employee Turnover Cost ...

    A recent Glassdoor survey revealed that almost 35% of hiring professionals expec...

    Read more
  • Staff Turnover: What Do You Need to Know?

    BLOG

    Staff Turnover: What Do You Need to K...

    Having a high worker turnover can have mean two things: A negative impact on you...

    Read more
  • What is Wrongful Dismissal?

    BLOG

    What is Wrongful Dismissal?

    If you breach an employee’s contract, you could be liable for wrongful dismissal...

    Read more
  • bemrose-school-derby

    CASE STUDY

    Bemrose School Derby

    “Having Croner-i saves us a lot of time and money, as we do not have to use cred

    Read more
  • wmtr

    CASE STUDY

    WMTR

    “I’d definitely recommend the Croner OnSite services and I have done already, I

    Read more
  • certikin

    CASE STUDY

    Certikin

    “Our Distribution Manager had a particularly technical query relating to respira

    Read more

Ready to focus on what you do best?

Get your free consultation and speak to an expert today.