Living Wage Dilemmas

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08 Jun 2016

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The introduction of the Government’s National Living Wage (NLW) on 1 April 2016, has caused confusion about what does and doesn’t count towards the NLW, says Kevin Gibson, Specialist Employment Consultant at Croner. Here Kevin reviews some of the key issues across the different business sectors and some of the questions we have had concerning the NLW.  

Hospitality industry

In the hospitality industry, gratuities from customers form a welcome and regular supplement to pay.  It’s common that tips are not retained by an individual member of the waiting staff but collected over the course of the week and shared out among the whole team, together with those tips customers have paid over by means of an extra charge onto their payment card. The regulations are quite clear on this; tips do not count towards the NLW.  

Hospitality, care and security sectors

What about payments that are guaranteed?  The hospitality, care and security sectors are routinely operating 24 hours per day, seven days a week. Staff whose work patterns do not fit into a normal nine to five, Monday to Friday pattern often receive a guaranteed premium on their pay to work these less socially acceptable hours and shift patterns. Here's examples of situations that are and are not compliant: John works for security firm and receives a flat rate £7.40 per hour when on nights. Justin however works as a carer in a nursing home on nightshift. Prior to 1 April, he earned £6.70 per hour plus £1 per hour nightshift premium, making a total of £7.70 per hour. Mr Roberts, the owner of the care home called our advisory service asking if Justin was ok saying: “he earns fifty pence an hour more than the NLW so he’ll be OK right?” Mr Roberts was shocked and disappointed that Justin’s pay was not compliant with the NLW. Even though Justin is guaranteed to be paid his nightshift premium, the premium element of his pay cannot be counted towards the NLW in exactly the same way it did not count towards the old National Minimum Wage.  

Can we?

The most common questions Croner are getting about the NLW is “How can we get round it or avoid it?” For example: “I know about the National Living Wage but I can’t afford to pay it. Also, that it only applies to twenty five year olds and above? If that’s so, can I fire any short serving staff I have who are over 25 and replace them with younger staff?” The advice he received from Croner was no, in this instance it would be direct age discrimination. The second example is: “Can I change the shift rates such that premia are now included in the base rate?” The simplistic answer is “yes”, but as it involves a significant change to terms and conditions, it will, if the employee isn’t willing to voluntarily accept the change, require a fair consultation process to take place. If 20 or more staff are affected, then collective consultation would be required.   Croner has produced an expert report on the National Living Wage and the strategies businesses are using to deal with it. Click below to download a copy.

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