News & Insights

National Living Wage – Employers Avoiding the Spirit of the Law

The Government’s national living wage was introduced on 1 April 2016.

The new wage applies to all working people aged 25 or over and is set at £7.20 per hour. On 18 April 2016, Members of the House of Commons debating the national living wage noted that some employers are cutting overall remuneration packages to offset the cost of the new wage, leaving thousands of employees significantly worse off.

On 19 April 2016, George Osbourne warned companies cutting staff remuneration packages to pay for the national living wage that they are not acting within the spirit of the law and should abide by their responsibilities.

The Government has acknowledged that the employer can choose to set and change the overall, wider remuneration level as long as they are paying at or above the national living wage, but stated that employers “will also need to consider whether the package, overall, remains competitive to retain and develop the people and talent they need for their business.”

In debate on 18 April 2016, it was announced that the HMRC enforcement budget will be increased to £20 million in 2016-17, up from £13 million in 2015-16.

The Chancellor has expressed his disapproval of companies cutting employee perks, stating “we will enforce the letter of the law but we want companies to also live by the spirit of the law.”

The Business minister Nick Boles has urged MPs to inform the government of profitable businesses seeking to avoid the spirit of the new laws.

Please contact our Employment team for further information.

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