New 2015 Living Wage Rate announced
The UK "living wage" - an hourly rate based on the amount needed to cover the basic costs of living - has been raised by 20p to £7.85, whilst The London Living Wage has been raised from 8.80 an hour to £9.15.
What is the difference between the Living wage and the national minimum wage?
The living wage is an informal benchmark, not a legally enforceable minimum level of pay line the national minimum wage. The national minimum wage is set by the business secretary each year on the advice of the Low Pay Commission. Unlike the living wage, the national minimum wage is enforced by HM Revenue and Customs (HMRC).
The basic idea of the living wage is that these are minimum pay rates needed to let workers lead a decent life.
Does this effect employers?
The living wage is a voluntary wage so employers are not legally obliged to pay it. Nevertheless, it has been adopted by more than 1,000 employers across the country benefitting 25,000 workers. Citizens UK, the community behind the living wage project say that the number of companies paying the rate has doubled in the last year. However, some business groups are not happy with the increase saying some employers might struggle to pay it.
The advice to employers should be to seriously consider the living wage, but only implement it if it is affordable.
Bright Contracts – Employment Contracts and Handbooks.
BrightPay – Payroll & Auto Enrolment Software.
Holiday Pay – UK Landmark Ruling!
Earlier this year the European Court of Justice (ECJ) ruled that holiday pay must correspond with normal pay which may be made up of additional amounts such as commission or overtime payments.
Whilst UK legislation would have to follow the ECJ, the ECJ did leave it up to national courts to decide how commission and overtime payments should be calculated. Employer groups have since been anxiously awaiting the UK’s decision, with fears that they could face:
• Billions of pounds in higher wage billons
• Costly claims for underpaid leave as far back as 1998
Yesterday, 4th November, the EAT finally made its long awaited judgement, ruling that:
• Many elements of pay which are currently excluded from holiday pay calculations now must be included e.g. commission and overtime payments. This will ultimately lead to higher wage bills for many employers.
• However, more positively limits have been put in place for back pay liability. Any claims in respect of underpaid holiday pay in the past will only be possible where no more than three months has elapsed between any such underpayments – in practice this is likely to mean that employees can only claim in respect of one year’s leave.
What Action Should Employers Take?
• Now: look at precisely what needs to be included in the calculation of holiday pay
• In the long term it will be worth reviewing how to structure working arrangements in order to minimise the increased liability for holiday pay. For example:
o Offering voluntary overtime rather than guaranteed overtime
o Using agency staff to cover periods of increased demand rather than offering overtime
o Revising commission plan payment schedules
o Preventing leave from being taken at certain times of the year
Bright Contracts – Employment Contracts and Handbooks.
BrightPay – Payroll & Auto Enrolment Software.
