UK small businesses face hefty fines if they fail to pay the new National Living Wage

The UK’s National Living Wage new rates came into force on the 1st of April, and non-compliant businesses could face serious penalties…

The UK’s National Living Wage (NLW) of £7.20 an hour, which applies to workers aged 25 or over, came into force on the 1st of April. Businesses that don’t pay the new rates to their employees could face serious penalties, and the Federation of Small Businesses (FSB) has urged small firms to make sure they’re compliant.

Here’s a rundown of what the NLW means for your business.

What is the National Living Wage?

The living wage is a compulsory minimum wage for employees who are at least 25 years old. It’s been set at £7.20, but it will be reviewed and adjusted in April each year. For workers under 25, the National Minimum Wage still applies.

The Conservative government have stated that this is part of their plan to ‘move from a low wage, high tax, high welfare society’ to a ‘higher wage, lower tax, lower welfare society’. Campaigners for higher pay have welcomed the move, but some businesses have voiced concern at the hike in payroll costs.

A survey conducted by FSB last year amongst its small business members found that 38% of them expected the new wage to negatively impact their business, with 6% predicting a positive impact. And that certainly seems to be the case amongst small businesses on social media, with many sharing their worries about the initiative…

‘Living wage’ sounds familiar…

If you’re wondering ‘wasn’t there already a ‘living wage?’ then you’re probably thinking about the Living Wage Foundation’s figure.

Each year, the foundation publishes a suggested rate of pay, based on the current cost of living. At the moment, this is £8.25 an hour, and £9.40 an hour for London.

Commenting on the government’s new National Living Wage, the Living Wage Foundation said: ‘We welcome the government’s new minimum wage rate for over 25s […] but we want to be clear that the job is not done on low pay.’

They claim that, unlike their figure, the NLW is not based on the cost of living.

The penalties for not paying

HMRC have set up a new enforcement team to prosecute employers.

If you don’t pay your employees the new rate you’ll be liable to pay 200% of the money owed, up to a maximum of £20,000 per worker. Employers can also be banned from being company directors for up to 15 years.

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