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  1. ITV Report

National Living Wage comes into force

Video report by Political Correspondent Lewis Vaughan Jones.

The new National Living Wage has come into force, meaning employers must pay workers aged 25 and over at least £7.20 an hour.

Unions welcomed the new rate for adults but said it was not fair that younger workers were missing out.

Business groups warned that firms' paybills will "ratchet up".

The government aims to increase the rate to £9 an hour by 2020, affecting an estimated nine million workers.

Research by the Resolution Foundation found that more than one in four employees in the Midlands, Wales and Yorkshire and the Humber will benefit, compared to one in seven in London.

Owen Smith, shadow work and pensions secretary, called it "a typically cruel sleight of hand from the Tories to introduce their version of the living wage with one hand, while taking five times as much in cuts to Universal Credit and Tax Credits with the other."

Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older.

But the Government must ensure that younger workers are not left behind. 21-24-year-olds will not be seeing an increase tomorrow. This is not fair. Future wage increases must narrow the pay gap between old and young.

– TUC general secretary Frances O'Grady

The head of analysis at the Joseph Rowntree Foundation, Helen Barnard said the new wage was an "important step towards a high-wage, low-welfare economy" but said it won't do a great deal for poverty on its own.

The Government's new living wage will apply a ratchet effect to all companies' pay bills, and sits alongside a raft of other high employment-related costs.

While many companies have the ability to increase pay, others will struggle to do so alongside pensions auto-enrolment, the apprenticeship levy, employer National Insurance contributions, and other up-front costs.

Some will have to divert money from training and investment to increase pay, which could hurt their productivity. Others may stop hiring altogether."

– Dr Adam Marshall, acting director general of the British Chambers of Commerce

Around 2,300 employers have already signed up to the higher voluntary living wage of £9.40 an hour in London and £8.25 for the rest of the UK.

Living wage explained:

  • All workers aged 25 and over are now legally entitled to at least £7.20 per hour
  • Anyone under 25 should be paid a minimum of the national minimum wage. This is £6.70 for those over 21, £5.30 for those 18-20, and £3.87 for under-18s.
  • The rate is different for apprentices in their first year, who can be paid £3.30 - rising to the minimum wage in their second year.
  • For more information for employees and employers visit the government's living wage website