Danger of Being Underpaid in 2016? Businesses Under-prepared for New National Living Wage

The new minimum wage being brought into effect next year is set to cost businesses around £1.1bn in the first year, according to official calculations.

The wage, which is being brought in for those over the age of 25, known as the National Living Wage, will have an up-front cost of £700 million for businesses. An associated bill of £137.5m for increased pension and national insurance contributions, £59.5m to up the pay of workers unaffected by the rules to maintain pay differentials and £224m in indirect transition expenses accounts for the rest of the £1.1 billion according to reports .

This cost is to meet the £7.20-per-hour initial rate by April 2016. Following on the rate will increase each year thereafter a rate equal to be well above £9 per hour by 2020. Some experts have warned that as a result of this increase, and further increased planned, it will cost businesses even more.

Businesses Unprepared for New Minimum Wage

Although the announcement of the increase of the new minimum wage was expected and that the vast majority of businesses welcome the change, a number are still unprepared according to a recent study. A survey of more than 1,000 employers conducted on behalf of the Department for Business, Innovation and Skills found more than nine in ten (93 per cent) thought the new national living wage was "a good idea.” Although the new changes would cost businesses more in terms of payroll, those surveyed believed that a new wage would boost staff productivity and improve loyalty in the workplace.

Despite the positives attached to the new change in employment law, most employers admitted that they had not prepared for the changes coming into place.

Fewer than 50% of those surveyed had updated their payroll to take account of who qualifies for the new rate while only four in ten had communicated the changes to staff.

A danger of Being Underpaid in 2016?

The new minimum wage has been a popular move across the vast majority of demographics. However, it still presents a danger to workers, especially those who are being underpaid currently.

In October this year, the UK government released the names of 115 companies who were not paying staff the minimum wage or underpaying them based on hours worked. 12 firms were included in the list with a number operating in Glasgow and Edinburgh. Despite employers being punished retrospectively and staff being paid what they were entitled to, a number of people have expressed concern that the new minimum wage will not be upheld further affecting the lowest earning in society.

TUC general secretary Frances O'Grady stated that although it was good to see some firms named and shamed, there would be more similar instances of underpayment.

She said: “Today's list of offenders is only the tip of the iceberg. Many more employers are getting away with illegal underpayment."

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