Your SME and the National Living Wage

Published on February 18, 2016

All you need to know about the increase in the national living wage From April 2016 the National Living Wage (NLW) will be set at £7.20 for workers aged 25 or over who are not in their first year of apprenticeship. It’s the law and will apply to all UK businesses including yours. It is […]

All you need to know about the increase in the national living wage

From April 2016 the National Living Wage (NLW) will be set at £7.20 for workers aged 25 or over who are not in their first year of apprenticeship. It’s the law and will apply to all UK businesses including yours. It is set to increase annually rising to £9 an hour by 2020.

The NLW is only applicable to workers aged 25 or over. It’s not to be confused with the National Minimum Wage which applies to people aged 24 and under.

The government will be increasing the Employment Allowance by 50% to £3000 to offset the cost of NLW.

This is a change that is welcome but has its challenges

NLW predictions

Recruitment
More than two thirds (77%) of SMEs are concerned that the NLW will make recruitment a challenge, according to a survey by job search engine Indeed (Nov 2015).

Another opinion echoing reservations is that the NLW will make senior level hiring a challenge. The NLW sets a new baseline for wages reducing the salary gap between senior and junior roles preventing people from wanting to take on extra responsibility.

Regional Variations
The NLW is likely to affect Sheffield, Nottingham and Birmingham as these cities have up to a quarter (25%) of employees on low pay, according to a report from the Resolution Foundation.1

The same report predicts that 28% of workers in Sheffield will receive a pay rise as a result of the NLW. While in London only 14% of workers will see a wage increase.

Pay morale
The NLW will change pay structures. For example, employees with different levels of responsibility will be paid the same. Or alternatively people of the same skill could be paid different wages. This is likely to result in friction in employee relations. An issue which HR will need to address.

1. Paved with gold? Low pay and the National Living Wage in Britain’s cities (January 2016)

Tips for SMEs

Payroll review
Ensure that your hourly rates match the NLW. Ensure that your systems account for dates of birth and adjusts wages accordingly for example when an employee turns 25 they are eligible for the NLW. Check that part-time and casual workers are being paid appropriately.

Recruitment
It may be worth hiring an apprentice to help reduce your wage bill and spread costs.

Contracts
Review your contracts to guarantee that they stipulate that employees will be paid NLW.

Budgets, profits and costs
Assess the cost of higher remuneration on bonuses, pension contributions, holiday and sick pay. It may be necessary to reduce outgoings and, or increase your income. Additionally you may decide to reduce hours or employees.

Changing your business structure
Investing in equipment and automation will reduce the number of employees needed for routine tasks allowing them to focus on people skill-based tasks.

It could be worth embracing remote and flexible working practices to help reduce wage bills allowing your SME greater flexibility.

If your SME needs help understanding how the NLW will affect you then please get in touch with us today to find out more: enquiries@bradfield.co.uk 

Related Articles

Enhancing Skills Through CIPD Courses in Learning and Development

In today’s fast-paced corporate environment, continuous learning and development (L&D) is crucial for employees and organisations alike. The Chartered Institute of Personnel and Development (CIPD) has established itself as a leading authority in the field of HR and L&D, providing a range of courses aimed at equipping professionals with the skills needed to thrive in […]

Read More
Understanding HR Hierarchy levels from an Entry Level Perspective.

When embarking on a career in Human Resources, one of the key considerations is understanding the hierarchy of HR professionals and understanding the potential career progression paths within the field. CIPD offers a valuable framework that outlines a typical HR hierarchy, providing a roadmap for aspiring HR professionals to navigate their way to success. HR […]

Read More
Exploring the Benefits of Bradfield's CIPD Online Courses

In today's fast-paced and ever-changing business environment, continuous learning and professional development have become essential for individuals looking to advance in their careers, particularly in the field of human resource management. Fortunately, online education has made it easier than ever to access high-quality courses from the comfort of your home or office. If you are […]

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *

Bradfield Offices

London: The William Tite Room, New London House, 6 London Street, EC3R 7LP, London, UK

Dubai: Knowledge Park, Block 11, Office 103, P.O Box 500702, Dubai, United Arab Emirates

Email: enquiries@bradfield.co.ukwww.bradfield.co.uk

Find Us On Socials 

Company Registration: Bradfield Learning and Development LTD No. 3835955
© Bradfield Learning & Development 2021. All rights reserved.
arrow-right linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram