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| Budget 2015: The new National Living Wage and you | Budget 2015: The new National Living Wage and you |
| (about 2 hours later) | |
| The announcement of a new Living Wage was the final flourish of a long Budget speech. Iain Duncan Smith - the self-coined "quiet man" - roared his delight in the Commons. | The announcement of a new Living Wage was the final flourish of a long Budget speech. Iain Duncan Smith - the self-coined "quiet man" - roared his delight in the Commons. |
| This cheer was echoed among some who now look forward to a guaranteed pay rise. | This cheer was echoed among some who now look forward to a guaranteed pay rise. |
| Yet, there were some boos among the business community, and from investors in retail companies as their share prices fell on the news. | Yet, there were some boos among the business community, and from investors in retail companies as their share prices fell on the news. |
| So how will the National Living Wage work, and what does it mean for you? | So how will the National Living Wage work, and what does it mean for you? |
| What is the new National Living Wage? | What is the new National Living Wage? |
| Chancellor George Osborne said there would be a new, compulsory Living Wage from April 2016. | Chancellor George Osborne said there would be a new, compulsory Living Wage from April 2016. |
| It will be paid to workers aged 25 and above. Initially, it will be set at £7.20 an hour, with a target of it reaching more than £9 an hour by 2020. Part-time and full-time workers will get it. | |
| It will give a pay rise to six million workers but is expected to cost 60,000 jobs and reduce hours worked by four million a week, according to the Office for Budget Responsibility. | It will give a pay rise to six million workers but is expected to cost 60,000 jobs and reduce hours worked by four million a week, according to the Office for Budget Responsibility. |
| How is this different to the National Minimum Wage? | How is this different to the National Minimum Wage? |
| The technical answer is that the minimum wage will remain in place, and the compulsory living wage will be a top-up for workers aged 25 and over. | The technical answer is that the minimum wage will remain in place, and the compulsory living wage will be a top-up for workers aged 25 and over. |
| The fact that it is compulsory has led some to say that this is simply a rebranded minimum wage. | The fact that it is compulsory has led some to say that this is simply a rebranded minimum wage. |
| Remember, the current national minimum wage is £6.50 an hour for those aged 21 and over. This will increase by 20p an hour to £6.70 from October. | |
| So how much will the under 25s get? | So how much will the under 25s get? |
| The lowest amount that they could be paid will be the National Minimum Wage, not the higher National Living Wage. | The lowest amount that they could be paid will be the National Minimum Wage, not the higher National Living Wage. |
| The Treasury argues that "the priority is to secure work and gain experience" for this group. | The Treasury argues that "the priority is to secure work and gain experience" for this group. |
| There are different minimum wage rates for different age groups. | There are different minimum wage rates for different age groups. |
| The statutory minimum for 18 to 20-year-olds will go up from £5.13 to £5.30 in October, and from £3.79 to £3.87 for 16 and 17-year-olds. For apprentices, it will go up by 57p to £3.30 an hour. | The statutory minimum for 18 to 20-year-olds will go up from £5.13 to £5.30 in October, and from £3.79 to £3.87 for 16 and 17-year-olds. For apprentices, it will go up by 57p to £3.30 an hour. |
| Isn't there a living wage already? | Isn't there a living wage already? |
| Yes, this is an informal benchmark, not a legally enforceable minimum level of pay, which is promoted by the Living Wage Foundation. | Yes, this is an informal benchmark, not a legally enforceable minimum level of pay, which is promoted by the Living Wage Foundation. |
| It is calculated by academics as the level of pay that will give workers enough for a basic standard of living. | It is calculated by academics as the level of pay that will give workers enough for a basic standard of living. |
| At the moment, that amount is £7.85 an hour, and £9.15 an hour in London. | At the moment, that amount is £7.85 an hour, and £9.15 an hour in London. |
| Some companies agree to pay at least this amount. They will have a decision to make about which living wage level they choose to use. They include some FTSE 100 companies such as SSE, Aviva, Barclays, Pearson, and Legal & General. Some big local authorities also pay the living wage. | Some companies agree to pay at least this amount. They will have a decision to make about which living wage level they choose to use. They include some FTSE 100 companies such as SSE, Aviva, Barclays, Pearson, and Legal & General. Some big local authorities also pay the living wage. |
| How is the new National Living Wage set? | How is the new National Living Wage set? |
| The April 2016 figure has been set at £7.20 an hour. | The April 2016 figure has been set at £7.20 an hour. |
| The government will ask the Low Pay Commission, which currently recommends the level of the minimum wage, to suggest a figure for the National Living Wage in April 2017. | The government will ask the Low Pay Commission, which currently recommends the level of the minimum wage, to suggest a figure for the National Living Wage in April 2017. |
| Mr Osborne said that there was an ambition that the National Living Wage should continue to increase to reach 60% of median earnings by 2020, subject to sustained economic growth. | Mr Osborne said that there was an ambition that the National Living Wage should continue to increase to reach 60% of median earnings by 2020, subject to sustained economic growth. |
| It is that calculation that leads to the aim for the National Living Wage to be more than £9 by 2020. | It is that calculation that leads to the aim for the National Living Wage to be more than £9 by 2020. |
| What has the Living Wage Foundation said about the new system? | What has the Living Wage Foundation said about the new system? |
| It said it was delighted with the chancellor's announcement, but raised some concerns as well. | It said it was delighted with the chancellor's announcement, but raised some concerns as well. |
| For example, it highlighted that their suggestion for the lowest level of pay in London was higher now (at £9.15 an hour) than the National Living Wage will be in 2020. | For example, it highlighted that their suggestion for the lowest level of pay in London was higher now (at £9.15 an hour) than the National Living Wage will be in 2020. |
| It also urged companies to pay the under 25s a living wage. | It also urged companies to pay the under 25s a living wage. |
| And what do companies make of it? | And what do companies make of it? |
| The wage hike is a "gamble" that risks putting politics into a system of setting a minimum wage, says John Cridland, director general of the CBI business lobby group. | The wage hike is a "gamble" that risks putting politics into a system of setting a minimum wage, says John Cridland, director general of the CBI business lobby group. |
| It may also cause problems for some small businesses, he says. | It may also cause problems for some small businesses, he says. |
| Fashion chains, supermarkets and the hospitality sector are expecting to have to raise wages. | Fashion chains, supermarkets and the hospitality sector are expecting to have to raise wages. |
| "Despite the chancellor trying to alleviate the pain with adjustments to corporation tax and employment allowances, these changes do not go far enough to reduce the impact on small businesses and mitigate potential job losses across the industry," says Ufi Ibrahim, chief executive of the British Hospitality Association. | "Despite the chancellor trying to alleviate the pain with adjustments to corporation tax and employment allowances, these changes do not go far enough to reduce the impact on small businesses and mitigate potential job losses across the industry," says Ufi Ibrahim, chief executive of the British Hospitality Association. |