From 1 April, the new National Living Wage (NLW) of £7.20 an hour must be paid to workers aged 25 and over.
This will effectively replace the National Minimum Wage (NMW) for them, which is currently £6.70 an hour. The NLW is expected to increase to around £9.35 an hour by 2020.
Workers aged 24 and under will not be entitled to the NLW and the NMW will continue to apply to them – currently £6.70 an hour for people aged 21 and over, £5.30 an hour for 18 to 20-year-olds and £3.87 for 16 to 17-year-olds.
So what could the NLW mean for businesses? Businesses are likely to have increased costs and will be looking to off-set those costs to maintain profitability. And how may they do that? Well, one simple solution might be only to employ workers who are aged 24 and under – which may be even more attractive as the gap between the minimum pay widens. But, this could result in age discrimination.
It is unlawful for an employer to discriminate, directly, by treating a job applicant or employee less favourably because of age without objective justification. Trying to argue that you are choosing to recruit the younger worker to avoid increased wages is unlikely to provide objective justification.
Supposing, the business tries to reduce costs by making redundancies? Even if there is a genuine redundancy situation, an employee with at least two years’ service could claim unfair dismissal on the grounds that you have failed to follow a fair and objective selection process.
Again, age discrimination could come into play when making redundancies, and no minimum length of service is required to bring the claim.
If an employee is cut on the basis that they are 25 or older (and do qualify for the NLW) as against a younger worker who does not qualify, this would be discrimination because of age.
It would be very hard to be able to justify your decision solely on the basis of the potential cost saving.