On the 1st April all UK employers were legally obliged to start paying their employees the new National Living Wage. For anyone aged 25 or over, this amounts to £7.20 an hour (for those under 25 it is the National Minimum Wage that applies). The intention is for it to be reviewed each April and adjusted if necessary.

Although it is good for workers who were previously on the National Minimum Wage and have been ‘upgraded’, some business owners have worried that it will negatively impact on their company’s bottom line, leading to cuts elsewhere and even closure in the most extreme circumstances.

But some groups want the NLW to be increased even further, to £8.25 (£9.40 in London as the cost of living is higher there). These figures come from the Living Wage Foundation and are calculated on what they feel is the real cost of living.

Whatever the pros and cons (and there are many on both sides) of the National Living Wage, there are some severe penalties for not paying it. There is even a new enforcement team set up by HMRC, the sole job of which is to find and prosecute employers who are not paying the correct amount.

The penalties include a fine of up to 200% of the money that hasn’t been paid (ie the shortfall). This fine is up to a maximum of £20,000 per employee. If HMRC see fit, the employer can also be banned from being a company director for up to 15 years.

They are taking the new National Living Wage extremely seriously; you should too.

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