Mandatory National Living Wage comes into force

The new mandatory National Living Wage (NLW) has come into force, requiring employers to pay workers aged 25 and over at least £7.20 an hour.

The policy was announced in last summer’s Budget by Chancellor George Osborne and is part of the Government’s plan to get more people off welfare and back into work, while creating a higher wage economy.

However, some businesses have complained that they will struggle to work the new pay rise into their budgets and may have to reduce staff levels, or at the very least, pause recruitment drives.

Workers aged 21 to 24 will continue to be entitled to the National Minimum Wage of £6.70 an hour.

Job losses 

The independent Office for Budget Responsibility has warned that 60,000 jobs could go as a result of the introduction of the Living Wage, but the TUC has commented that the new wage is good idea.

 “Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older,” TUC general secretary Frances O’Grady told the BBC.

“But the government must ensure that younger workers are not left behind; 21 to 24-year-olds will not be seeing an increase.

“This is not fair. Future wage increases must narrow the pay gap between old and young.”

For its part, the Living Wage Foundation pointed out that its own suggested level of pay – £8.25 an hour and £9.40 in London – was higher than the NLW.

“The job is not done when it comes to tackling low pay,” said the foundation’s director, Katherine Chapman.

“Businesses who can afford to pay a rate that reflects the real cost of living should do so and join over 2,300 employers signed up to pay our higher voluntary Living Wage.

“For profitable business or those who see themselves as innovators and leaders, simply not breaking the law on pay is not enough. Many businesses want to aim higher.”

The intention is for the NLW to rise to more than £9 an hour by 2020.