One of the main policies highlighted in George Osbourne’s summer budget are the changes to minimum wage. From April next year all employers must pay workers aged 25 and older a “national living wage”, which is initially set at £7.20. There are then plans to raise it to over £9.00 an hour by 2020.
This is on top of the increase in minimum wage happening later this year. From 1st October 2015, the minimum wage for employees 21 and over will be £6.70 while those aged 18 to 20 will receive £5.30 an hour.
If businesses fail to pay their staff the minimum wage then HMRC can send them notice for the arrears plus a severe penalty for non-compliance. They may also resort to court action if employers persist.
Small businesses are particularly concerned about this new living wage. To help compensate employers, the Government are going to increase the Employer Allowance by 50% to £3,000 for the year. There are also plans to cut corporation tax from 20% to 18% by 2020.
If you would like to know more about how the living wage will affect you, please contact us.