Preparing for the national living wage

Transcription

1 Preparing for the national living wage A recording of this webinar and the slides will be made available within a week of this event To listen in, please make sure the sound on your computer is un-muted and your speakers are turned on/headphones are plugged in

2 Speakers Darren Newman Director of In- Company Training Services Ltd Sheila Attwood XpertHR Pay and HR practice managing editor Emily Kenway Campaign & communications manager, Living Wage Foundation Mark Jarman- Howe Chief executive, St Helena Hospice

3 The National Living Wage Not to be confused with the Living Wage In reality a political label for a new rate of national minimum wage applicable to those aged 25 or over: 7.20 Applies to pay reference periods starting 1 April 2016 onwards Pay reference period is a month or shorter period, depending on how often worker is paid

4 The New Rates The rate of the NMW for workers aged 25 or over is 7.20 For those aged 21-24: 6.70 For those aged 18-20: 5.30 For those aged under 18: 3.87 The apprenticeship rate: 3.30

5 Paying the minimum wage Law does not require each and every hour to be paid at the minimum rate What matters is the average hourly rate of pay over the reference period Pay that does not count: Benefits in kind Vouchers or stamps Tips and gratuities Allowances and overtime premiums

6 Measuring Working Time Not to be confused with measuring working time under the Working Time Regulations Travel time Standby and on call Rest breaks With a higher minimum rate, the safety margin around grey areas is smaller

7 Age discrimination Paying the right rate for an employee s age is not unlawful But basing recruitment / redundancy decisions on age is likely to be Unlikely that tribunal would accept justification argument based on cost alone

8 Other rights Automatically unfair to dismiss or select for redundancy because employee qualifies for minimum wage Unlawful to subject worker to detriment for qualifying for minimum wage

9 Penalties and enforcement Notice of underpayment Arrears of wages Plus financial penalty of 100% of the shortfall (up to 200% from 1 April 2016) - capped at 20,000 per worker Enforcement officer can take action through employment tribunal if not complied with Individual employment claims possible - but likely to be deterred by fees

10 National living wage - XpertHR survey Conducted December organisations Just under half (48.5%) have affected employees Median 11.8% of the workforce will be affected

11 Issues (1) - Cost A full-time employee moving up from the 6.70 an hour national minimum wage to the 7.20 an hour national living wage in April 2016 will benefit by more than 900 over the year. Survey findings Per employee in first year 593 By broad sector: Public services 162 Manufacturing and production 728 Private sector services 577 By organisation size: Up to 249 employees employees 600 1,000+ employees 499

12 Issues (2) - Funding For the most part, employers are expecting to increase their reward budget to pay for these increases. Significant minority taking self-funding or zero-cost approach, eg reducing pay rises, reducing worker numbers

13 How employers will fund pay increases

14 Knock-on effects (1) - Under 25s Employees aged under 25 have no statutory right to NLW - 21 to 24-year-olds paid NMW ( 6.70ph) 60% of employers with under 25s will increase their pay to equivalent of NLW Wording to use? (raising expectations) What about future years?

15 Knock-on effects (2) - Differentials What about employees earning more than 7.20ph? Practicalities Differentials Pay and grading structures Cost Future years?

16 Knock-on effects (3) Salary sacrifice Salary sacrifice must not take employee s pay below the NLW Review existing participants - will any now fall foul of this when pay increases to 7.20ph? Those tied into existing arrangements - speak to your provider

17 Planning to 2020 Future increases recommended by Low Pay Commission - will report in October 2016 on recommended rate for April 2017, and early indication of April 2018 rate BUT Government has a "target of the total wage reaching 60% of median earnings by 2020" with an "objective to have a national living wage of over 9 by 2020" To reach 9 an hour in April 2020, national living wage would need to increase by 45p an hour every year - approximately 6% per year If NMW (21-24 year-olds rate) increases by 3% each year, will be 7.54 in 2020 (a 4% increase each year would take it to 7.84) = around 1.50 gap between NMW and NLW Start pay modelling now - affected employees; differentials; salary sacrifice

18 Quick facts about the Living Wage CALCULATION Annual; announced each November According to the cost of living Two rates to account for London s cost of living CRITERIA Applicable to: - Over 18s - Staff - Contracted workers - 2 hours or more per week over 8 consecutive weeks or more UK only Not supply chain Phased implementation

19 Context Cross-party backing; Mayor of London partnership Over 2000 accredited employers: - Across size spectrum - 65% SMEs - Third of FTSE Breaking into new sectors

20 Why become a Living Wage Employer? Recognising their people deserve a share in success; and that well paid people perform better. Business benefits: 25 % reduction in absenteeism Reduction in turnover and better recruitment calibre Enhanced productivity and fewer customer complaints 70% of consumers would actively shop in favour of a LW employer Profile-raising from accreditation and our active promotion uses across materials, premises and sites Clear ethical case: ending in-work poverty

21 EMPLOYERS Three Schemes Standard accreditation criteria Flagship scheme SERVICE PROVIDERS HQ Market rate bid plus LW bid Breaking into a new sector FUNDERS Committing to LW grants only All funder types

22 FAQ on accreditation Useful links Reports on low pay in Britain, the cost/benefits of going Living Wage and evidence of the business case: To enquire about accreditation: Or

23 Why the Living Wage makes sense for St Helena Hospice Mark Jarman-Howe Chief Executive

24 About the hospice

25 Unmet need and inequality Reducing unmet need is our greatest strategic priority Inequality of access to palliative care a major challenge

26 Payback to our community

27 Valuing social care

28 and it makes business sense! All our staff can have a positive impact on the experience of our patients and families Evidence of social value gives us a competitive edge in NHS and local authority procurement - also attractive to donors and grant making trusts Recruitment and retention - right people right time can save 000s Accreditation helps assure community and regulators that we have fair and proportionate pay structure

29 resources What is the national living wage? When does the national living wage come into force? Letter advising a worker of a pay increase because of the introduction of the national living wage Is it permissible for a salary sacrifice arrangement to reduce an employee's pay to below the level of the national minimum wage? On-demand webinars: bit.ly/xperthrwebinars