National Living Wage

During the most recent budget we received the somewhat unexpected announcement that the National Living Wage is to be introduced from April 2016 for staff aged 25 and over. Since the announcement, the various pros and cons have been debated, with many of the larger UK employers adding their voice to the discussions.

The Managing Director of Manpower is quoted as saying that “The national living wage is sending shockwaves through the UK labour market.” They surveyed 2100 employers and found that many are scaling back recruitment plans and that job prospects were at their weakest since the end of 2012.Balmer Accounts - National Living Wage

The Office for Budget Responsibility (OBR) has estimated that up to 60,000 jobs could be lost as a direct result of the increased costs to UK employers. Other organisations are suggesting that employers may resort to more dubious practices in order to avoid the cost increases; for example, hiring a greater proportion of people younger than 25 as they are still covered by the National Minimum Wage, not the National Living Wage. The downside of such methods is that they may open up employers to legal action for age discrimination.

National Living Wage

The support services company Interserve has stated that the increased wage bill for their 15,000 cleaners could total £15m, an equivalent to 12% of annual profits. Retailers Whitbread (who own Costa Coffee and Premier Inn) and Next have already announced that they will increase prices so to pass on some of the increased costs to customers. The pub and restaurant operators JD Wetherspoons has suggested that the necessary price rises will further increase the differential between pub prices and supermarket prices leading to further pub closures.

The OBR is keen that employers don’t make knee-jerk reactions when the National Living Wage is introduced. They need to look at the bigger picture not just the baseline of staffing costs, such as future business plans, increases in employee productivity/engagement, specific skill requirements etc. This underlines the requirement to plan actively, including workforce planning, so that increased salaries and on-costs can be accurately predicted and monitored following introduction of the Living Wage.

To see the latest National Minimum Wage and National Living Wage rates, follow this link.

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