Will the New National Living Wage mean More Money in your Pay Packet?
In this post we are looking at the news released back at the start of the month that from the start of April the government are introducing the new mandatory National Living Wage (NLW) for workers ages 25 and above. The short version is that it’s predicted up to one in three workers in many parts of the UK will receive a pay rise!
So what is the National Living Wage ?
The National Living Wage is a new and compulsory legal higher minimum hourly rate that employers will have to pay their staff. However, the new limit of £7.20 only applies to workers over 25 years of age and works out to approximately £15,000 a year when working a 40-hour week.
The previous National Living Wage for workers over 21 years of age was £6.70, which worked out to approximately £14,000 per year again for a 40 hour working week. That rate will still apply to workers aged 21 to 24 years of age. For those on the National Living Wage aged 25 or older it, depending on hours worked could mean a significant rise of around £1000 per year.
How is the new National Living Wage worked out?
The government has based their calculations based on median average earnings, meaning that everyone is to be paid at least 55% of the National Average Wage. They also plan to raise this new minimum to at least 60% of median earnings by 2020 which would bring the hourly rate to around £9 per hour by 2020.
There are already a number of companies like Google and HSBC that calculate their staff wages to what’s called the Living Wage. The Living Wage is calculated based on the cost of living in that area and is still higher than the new National Living Wage. Outside of London the Living Wage is currently £8.25 per hour and £9.40 inside.
How many people will this benefit?
It is estimated that up to one in six employees across the UK will be affected by the National Living Wage totaling approximately 4.5 million people. This figure includes around 1.8 million workers who earn under £7.20 who will get a direct hourly rate increase, and another 2.6 million who earn just over £7.20 may, according to the Resolution Foundation, receive a pay increase in order to differentiate between them and lower-paid staff.
Does it make a difference where I live?
There are a number of places such as Sheffield, Torridge in Devon, Rossendale in Lancashire and Woking in Surrey which are thought to benefit the most from this increase.
Will the new National Living Wage affect my job?
The Guardian reported back in November 2015 that John Cridland, outgoing director general of the business lobby group CBI believed it is a gamble and will potentially cause problems for many companies around Britain.
The BBC also reported that former Sainsbury’s boss Justin King said that the new national living wage would “destroy jobs”
Either way; for those aged 25 and upwards it will mean a significant improvement to pay levels, resulting in more bills being paid and more food on the table.