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Why the National Living Wage rise is less generous to low paid workers than it appears - comments from Mark Crail, Content Director, Xpert HR

XpertHR’s content director Mark Crail says, “The increase in the National Living Wage from £7.20 to £7.50 next April is considerably less generous to the low paid than it first appears.

At the time the National Living Wage was introduced in April of this year, it was forecast to rise to £7.64 in April 2017, and then again year on year until it hit £9.16 or 60% of median earnings in April 2020. But earnings are now expected to rise considerably more slowly, with the Low Pay Commission suggesting a likely end-point in 2020 of £8.61. That means that in April 2017, an employee on the NLW will be 14p an hour worse off than they would have been if earnings had continued to grow at the rate they were in April 2016. For someone working a 40-hour week that's £5.60 a week or £291.20 a year.

By April 2020, they will be 55p an hour worse off, which amounts to £22 a week or £1,144 a year. On the other hand, employers in low-wage parts of the economy, particularly the care sector, will breathe a sigh of relief.

An employer with 100 employees on the National Living Wage rate will save £560 a week on their wages bill from next April or £29,120 in the full year. By 2020 their wages bill will be £114,000 a year less than it would have been on the April 2016 projections.”

Adrian Lewis, Director of Welsh HR software provider Activ Absence comments, “We welcome the increase in the National Living Wage and the promise of more investment in broadband and  transport links, however the Welsh Government needs to make sure that investment in Wales’ infrastructure is also made.   Broadband speeds and the road and rail networks this side of the Severn Bridge often inhibit business objectives, we cannot become the poor relation as investment in England increases.”