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National Living Wage (what are companies obligations?)

Obligations mandated for employers include the responsibility for a company to keep records proving that they are paying the minimum wage. This is most often fulfilled by companies in utilizing payroll records as proof, and all records must be maintained for a minimum of a three-year retention period. Beyond keeping records of employee payments via payroll, an employer must ensure that a worker is paid the minimum wage, on average, for time worked in what is known as a pay reference period. A pay reference period can be described as the period over which earnings are measured. An example would be an employee that is paid weekly, having a week-by-week pay period, or potentially with a driver that is paid monthly, having a pay period of a month. Whatever the pay period agreed upon between employer and employee, the National Living Wage has created the obligation for companies to follow that the minimum pay period is at least one week. 

Pay structure identified by the National Living Wage has also created the obligation for companies to pay close attention to the age of their employees. Whether a company aligns with the utilisation of a pay calculator,  or otherwise maintains pay structure, they must focus on age bands for employees younger than age 25. Also, as a guidance implicated in different types of work being done, to ensure that the correct rate of pay is being given to employees.  After an employee reaches age 25, they fall in alignment with the National Living Wage, making this date and age-line critically important to monitor for companies in the UK.

Type of work and work-classifications should also be noted and in focus for companies in the UK, just as with close attention to age bands. Differences in pay structure for time work, or employees paid by the hour, will be vastly different in calculating the average wage received as compared to an employee that is paid on an annual salary basis, or who is being paid on a contract for a basic number of hours outlined for the year. Other, less common pay structures may also be calculated differently when it is seen with paid-by-the-piece payment to employees, known as “output work,” most commonly referred to in industries where an individual creates a specific product or assembles products on a line. 

Based on the unique circumstances of each company, there are a vast amount of obligations that need to be upheld to meet the criteria outlined by the National Living Wage. The key obligations to always keep in the foreground as a manager or business owner is in line with paying employees properly for work done and keeping a solid record of payments distributed to employees.  

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