National Minimum Wage rates remain a challenge during pandemic<\/p>\n<\/p>\n
The impact of COVID-19 continues to challenge the UK, not only as a society but also its economy and its employers. Whilst the subject and all its implications on the work of payroll dominates every minute of our working day, what has happened to all the \u2018business as usual\u2019 challenges?<\/p>\n
The National Living Wage (NLW) was introduced during the summer 2015 Budget (the year with two Budgets). The Chancellor of the day, George Osbourne, announced a new NLW of over \u00a39 an hour by 2020, which at the time represented the prediction for 60% of median earnings. \u00a0<\/em><\/p>\n The LPC was tasked with setting out how the 60% rate would be achieved by 2020 and from that point built in processes to their annual review that set and charted the necessary annual increases.<\/p>\n The NLW aspiration was set subject to rates being sustainable, taking into account economic growth and broader economic conditions. The NLW did build in a tolerance for some loss of employment, something that the LPC has\u00a0always been tasked to protect when recommending National Minimum Wage (NMW) rates.<\/p>\n April 2020 saw the target of 60% median earnings being met with the NLW rate at a slightly less headline-grabbing rate of \u00a38.72.<\/p>\n Calls were made to pause the increase due to the coronavirus outbreak, but the crisis came too late to postpone increases for pay periods that began on or after 1 April. Due to the complexities of pay deadlines, many payrolls would already have been processed with the increases before the pandemic hit the UK.<\/p>\n But how will COVID-19 impact the rates for 2021?<\/p>\n The LPC 2020 annual review will consider this impact, as well as the impact of the UK leaving the EU may have had, as it sets out with a new remit, which aims to see the NLW achieve a rate that is two-thirds of median earnings.<\/p>\n NLW is currently payable to employees and workers aged 25 and above, but this age range is due to be extended to include 23 and 24 year olds from 2021, with a further extension to include 21 year olds by 2024.<\/p>\n NLW increases, whilst building in tolerance for loss of employment, do take account of broader economic conditions, which at this moment in time could result in a decrease in NLW rates, but there can be no argument that the economy is under severe pressure at the moment and is unlikely to recover by April 2021.<\/p>\n One of the key questions discussed since NLW was introduced is the impact the higher rate would have on pay differentials. 2017 research published by the LPC confirmed that its introduction had indeed had an impact, some of the key findings also included:<\/p>\n Employers now routinely review their salary sacrifice schemes to establish which employees will need to be taken out due to the increase to the minimum wage rates. This wasn\u2019t caused by the introduction of the NLW but the numbers affected has increased.<\/p>\n This year\u2019s consultation challenge for the LPC is attempting to deal with a normal process during abnormal conditions, however it looks to ask many of the same questions relating to:<\/p>\n As you might imagine many of these questions are going to be difficult to address given the current situation, nevertheless and in support of the CIPP written response, we have produced a survey<\/a> to gather statistical evidence and views.<\/p>\nLPC new remit<\/h3>\n
The challenge of the introduction of the National Living Wage<\/h3>\n
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LPC consultation 2020<\/h3>\n
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