Considerations for the National Living Wage

The National Living Wage has been implemented for over a month and has already sparked a great deal of controversy. Introduced on the 1st April 2016, it has raised the hourly wage for workers aged over 25 to £7.20, rising to £9.00 by 2020.

Following its introduction, many big businesses have found themselves coming under fire. The businesses in question have cut working hours, staff benefits (such as a paid lunch and free staff food), bonuses and reduced overtime pay in an attempt to counterbalance the increased cost of labour.

While the media and public continue to criticise larger companies for the actions; for many smaller businesses taking these measures may be unavoidable in the face of increased price and market competition.

Consequently, as the recent developments show, businesses are finding themselves in a difficult situation in adjusting to the change in the rate of pay and whilst cuts may fix the balance sheet, they may result in a loss of morale, productivity or customers which will impede the business in other ways.

As a starting point, two practical considerations should be remembered:

  1. When budgeting for the future, it must be remembered that national insurance contributions will also gradually increase.
  1. In considering the organisation of staff structures, you must consider the terms and conditions of employment. Please ensure that any changes are executed in accordance with the law.

If you are looking to make changes to your staff structures, contact with us. We have over 30 years of legal experience which enables us to deliver clear, cost effective advice.

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