National Living Wage: Dark clouds and silver linings for UK SMEs

It’s 2016! We have the Rio Olympics to look forward to. It’s the Chinese Year of the Monkey and, oh, the year that the UK gets a National Living Wage of £7.20. How will small businesses cope with this major change? We are about to see a considerable 50p added to the current National Minimum Wage (NMW) for most people!

Gemma Tumelty from The HR Dept puts that rise into context: “The annual rise in the National Minimum Wage has rarely been by more than 20p, so this jump is a game changer. It will have a big impact on many businesses and I would urge them to plan for it as much as possible.”

It’s important to remember, too, that this is just the start. The government has indicated that the National Living Wage will hit £9 per hour by the end of the decade. It applies to workers aged 25 and over.

Gemma adds: “SMEs will be right to have concerns over the National Living Wage. Particularly those with tight staffing budgets. Cash flow may be impacted, growth restricted, and it may cause discord among staff on other pay grades. These may need to be adjusted upwards too, to maintain differentials.”

Then there is the administration. Payroll is already becoming more complicated. Detailed records will need to be kept to ensure that low-paid staff turning 25 are moved on to the National Living Wage. Fail to comply and the penalties range from public naming and shaming to fines and even criminal prosecution.

Is there any silver lining? “If you are looking for good news,” Gemma concludes “research cited by the Living Wage Foundation suggested that paying a living wage could lead to improved staff performance, better retention and reduced absenteeism. These may all add up to cancel out the hit you will take on your payroll.”

The HR Dept can advise and assist businesses to stay compliant with the National Living Wage and all other payroll obligations.

Date:
Thursday, January 28, 2016
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Preventing People Problems

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