More pounds in the pocket of workers with introduction of national living wage

National living wage: 3 employment law risks to be avoided


On 1st April 2016 the new national living wage is set to come in force. This will see employees over the age of 25 earning £7.20 per hour.

With the changes now just 2 months away, LawforEmployers are looking at the employment law risks employers could soon be facing.

Most of the challenges caused by the national living wage will likely relate to managing higher costs.

Yet this could lead to a number of employment law risks which employers will need to be wary of.

National living wage redundancy situations

A potential risk for employers is age discrimination. If employers cannot afford increases in wages, there may be a need to cut staff numbers.

Yet it is important for employers to be cautious over who is selected in a redundancy process. There is a potential for age discrimination if staff over the age of 25 are selected for redundancy.

The courts are unlikely to accept an attempt to avoid paying the national living wage as justification for direct age discrimination.

For expert advice on following a reasonable procedure in a redundancy situation, call our expert employment law solicitors on 01282 695 400.

Or, take a look at our redundancy advice page for more information on making someone redundant.

Making changes to employee contracts

Another step some employers may be considering is to cut certain discretionary payments or bonuses. However this could cause contractual issues.

Employers should always consult with employees before making any changes to contracts of employment and ensure any changes are agreed to by the employee.

If contracts contain flexibility clauses, this will not immediately mean that major changes can be made. Flexibility clauses will only affect minor and reasonable changes which are not detrimental to the employee.

Changes such as the reduction or removal of bonuses could still result in unlawful deduction from wages claims and constructive dismissal claims.

Age discrimination in future recruitment

The introduction of the national living wage could also lead to employment law risks in future recruitment.

Employers looking to hire people aged under 25 in order to avoid paying the national living wage could face indirect discrimination claims.

For instance, if two potential employees are rated the same at interview the employers should not take age into consideration.

Favouring potential employees aged under 25 during the recruitment process due to a wish to save money could amount to direct age discrimination.

Penalties for a failure to comply with the national living wage

Employers who deliberately fail to pay qualifying staff will face a fine of 200% of arrears owed up to £20,000 per unpaid employee. This will be halved if it is paid within 14 days.

Those who fail to comply with the national living wage could also face criminal charges. If found guilty, they could be disqualified from being a company director for 15 years.

Avoid employment law risks with expert advice from LawforEmployers

To ensure you avoid the employment law risks caused by the introduction of the national living wage, contact the specialist employment solicitors at LawforEmployers today.

For a free, no obligation consultation, call us on 01282 695 400.

Or, simply complete our quick online contact form to book your free consultation today.