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Reducing costs with NLW

With the introduction of the National Living Wage, we have found that in order to lower costs, certain employers are recruiting under 25 year olds, in order to avoid paying the increased living wage allowance.

This can be a risky strategy for the decreasing returns it would potentially offer (see below); as it potentially leaves employers in breach of age discrimination laws.

There has been no increase to the NLW rate this month for over 25’s; however all other NMW rates increased from the 1st October. The new minimum hourly rates are as follows:

Adults aged:-25 and over: £7.20 (NLW - no change)

21 to 24: £6.95

18 to 20: £5.55

16 -17: £4.00 and Apprentices: £3.40.

So what can you do? Under the Employment Equality (Age) Regulations (NI) 2006, it is unlawful for employers and others to discriminate on grounds of age in the areas of employment and occupation. Employers are required to recruit the best for the role and not take age into account during the recruitment process or during employment (for instance promotion, redundancy). There are other safer ways in which an employer could contractually reduce payroll costs. E.g. review bonuses, manage sickness, freeze pay increases).

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