Employers are staying ahead of the National Living Wage
29 November 2018
In their recent blog Anthony Lord, economist at the Low Pay Commission (LPC) reviews their research findings and considers why, the coverage of workers in receipt of the National Living Wage has remained relatively flat since its introduction which saw the 70p increase in the main rate of the minimum wage lead to an increase of over 50% between April 2015 and April 2016 in the number of jobs covered by the minimum wage from 1 to 1.6 million jobs.
In considering the reasons for this the LPC accepts that there is no obvious reason for the current findings but highlights a number of possible reasons:
- By 2016 the NLW had already captured all the jobs that could easily be moved onto the minimum wage without affecting differentials; since then, employers have had to retain some differentials for those roles paid above the minimum wage, and further increases could require them to rearrange their workforces?
- The tightening labour market means that employers feel that they need to continue to pay above the NLW?
- It could be that, because the LPC has provided a clear path to 2020, employers have chosen to pay ahead of the NLW for the moment knowing that the wage floor will eventually catch up, and that when we reach the 2020 target we could see coverage rise again?
Whatever the reason – and it is acknowledged that there are many competing challenges at present that could impact the ‘coverage’ of the NLW in the future - it remains to be seen how much longer employers can continue to pay those jobs at a rate above the NLW, as the minimum wage increases along a path to 60% of median earnings in 2020 – currently predicted to be the rate of £8.62 (subject to significant economic upheaval).
The Low Pay Commission 2018 Report can be read in full at GOV.UK.
We await further news relating to ‘one-sided’ flexibility and the possible introduction of a premier rate of pay for non guaranteed work.
It was from a recommendation of the Low Pay Commission that legislation has been amended that requires the employer to report hours on all payslips where pay is calculated by reference to time worked.
We still await guidance from Government to support employers in ensuring that they can deliver and changes that may be needed to their current systems and processes.