The Department for Business, Innovation and Skills (BIS) has advised businesses to make early preparations for the introduction of the National Living Wage (NLW) on 1 April 2016.
BIS has set out four steps for employers in the run-up to the NLW becoming law:
- Know the correct rate of pay, which is £7.20 per hour for staff aged 25 and over
- Find out which staff are eligible for the new rate
- Update the company payroll in time for 1 April 2016
- Communicate the changes to staff as soon as possible.
Business minister Nick Boles said: “I am urging businesses to get ready now to pay the new £7.20 rate from 1 April 2016. With just under four months left, there are some easy steps employers can take to make sure they are ready.
“By taking these measures, companies will be able to properly reward their staff and avoid falling foul of the law when it takes effect.”
The advice from BIS coincides with a poll of 1,000 employers conducted by the department, which revealed that only 45 per cent of the businesses polled had updated payroll to take account of staff aged 25 and over on 1 April 2016.
The study also discovered that just 39 per cent had communicated the upcoming changes to staff, while only 29 per cent had looked online for more information about NLW entitlement. This was despite 63 per cent of employers saying they knew who in their business should be getting the new NLW.
Helen Hargreaves, policy and research manager at the Chartered Institute for Payroll Professionals (CIPP), said: “There is no doubt that the National Living Wage will be welcomed by employees.
“However, as the leading payroll professional body we must view this from a payroll professional perspective. By implementing the National Living Wage on 1 April rather than 1 October, employers may not be in a position to make the necessary preparations in time.
“While employers may expect their payroll software to deal with these changes when it’s updated, the CIPP has been encouraging members to assess how their workforce will be affected and the significant impact it may have on their financial forecasts.”
If you would like assistance preparing your payroll for the introduction of the NLW next year then out team of payroll specialists at Moore Thompson can help. To find out more, please contact us.