HM Treasury declared on Friday that the new compulsory National Living Wage (NLW) of at least GBP7.20 per hour, for workers aged 25 and above, is effective as of 1 April 2016.
Chancellor George Osborne announced the NLW in his budget speech last summer, as part of the government’s efforts to create a higher-wage, lower-welfare economy.
From 1 April 2016, the government said around 900,000 women and half a million men will receive an immediate pay rise on their hourly earnings. Workers aged 21 to 24 will continue to be entitled to the National Minimum Wage of GBP6.70 an hour.
According to the government, certain parts of the country will see a fifth of the entire workforce benefiting directly from the NLW, which equates to a GBP900 cash increase for a full-time worker on the current National Minimum Wage. The Office for Budget Responsibility (OBR) also estimates that up to six million people will receive a pay rise as a result of a ripple effect causing pay to rise further up the earnings distribution.
In addition, the NLW is expected to rise to more than GBP9 an hour by 2020.
However, the independent Office for Budget Responsibility has warned that 60,000 jobs could be lost as a result of NLW, amid concerns that companies will struggle to pay the new higher wages.
In conjunction with the introduction of the NLW, the Chancellor announced new analysis that shows female workers in the UK will be given a boost, because the gender pay gap is expected to fall from the current 5.6% to zero by 2020. Over the next five years women being paid the NWL will see their pay increase by over a quarter and growing more than 1.5 times faster than the salary of an average worker.
Additionally, the government has also committed to providing 30 hours of free childcare a week for working families with three and four year old children. This policy also extends the right to request flexible working to all employees and introduced a new system of flexible parental leave.