From 1 April 2016, all employers, regardless of size, will be required to pay the National Living Wage to all employees aged 25 and over.
This means that the minimum wage for employees aged 25 and over will rise by 50p from £6.70 to £7.20.
The current minimum wage will continue to apply for those under the age of 25:
The rationale behind this increase is to help individuals and families afford a decent standard of living. This includes being able to pay for food, transport and bills. Many organisations, most notably the Living Wage Foundation, have been campaigning for employees to pay more than the minimum wage for a number of years.
Their research has found that employees working full time, earning the minimum wage, are struggling to make ends meet due to the high cost of living.
There will be a reduction in national insurance contributions which will assist small businesses but as the minimum wage applies to all workers, (excluding the self -employed, volunteers and company directors), employers will need to take urgent steps now to minimise the impact the increase will have on their businesses.
You will need to take extra care to ensure that you take into account employees who will turn 25 in the coming months.
Now is also a good time to check that all of your employees are on the correct hourly rate, as the minimum wage regulations will continue to be strictly enforced by HMRC.
A robust absence and sickness policy, correctly implemented, can drastically reduce sickness in the work place.
Have a personalised absence policy drafted that will empower you to deal with absences at an early stage and before absences start to affect your profits.
Reducing the number of hours/shifts given to employees, increasing the cost of their product so the increase is passed to customers, negotiating better rates with suppliers and making redundancies are some of the ways in many employers are dealing with this.
Is that wrong? Or is it acceptable to keep your margins the same by passing on the problem?
For more from Jay Bhayani, see:
I would love to hear your thoughts. What are you doing in your business to deal with the National Living Wage? Login or sign up to comment.
This means that the minimum wage for employees aged 25 and over will rise by 50p from £6.70 to £7.20.
The current minimum wage will continue to apply for those under the age of 25:
The rationale behind this increase is to help individuals and families afford a decent standard of living. This includes being able to pay for food, transport and bills. Many organisations, most notably the Living Wage Foundation, have been campaigning for employees to pay more than the minimum wage for a number of years.
Their research has found that employees working full time, earning the minimum wage, are struggling to make ends meet due to the high cost of living.
Concerns for business
This rise has understandably caused great concern to businesses large and small, as the increase will cost an employer an additional £910 per year for every full time employee on the minimum wage. Employers have already been encouraged to budget for pension auto enrolment and holiday pay changes.There will be a reduction in national insurance contributions which will assist small businesses but as the minimum wage applies to all workers, (excluding the self -employed, volunteers and company directors), employers will need to take urgent steps now to minimise the impact the increase will have on their businesses.
Good financial planning is key
Once you have checked how many of your employees the new ruling will effect, you need to assess the full financial impact this will have on your business.You will need to take extra care to ensure that you take into account employees who will turn 25 in the coming months.
Now is also a good time to check that all of your employees are on the correct hourly rate, as the minimum wage regulations will continue to be strictly enforced by HMRC.
What else should you do?
Now is a good time to get things in order and retain the best people in your business. Manage performance and put in place robust appraisal and supervision sessions. Manage sickness and absences proactively.A robust absence and sickness policy, correctly implemented, can drastically reduce sickness in the work place.
Have a personalised absence policy drafted that will empower you to deal with absences at an early stage and before absences start to affect your profits.
Consider restructuring and/or redundancies
Whilst never desirable, restructures and redundancies can sometimes be necessary to streamline work processes, maximise individual productivity and reduce the payroll.Negative impact of National Living Wage
The unfortunate consequence of increasing pay rates has been surprising to me. Over the last few weeks I have had businesses reporting a number of ways they plan to 'get around' the problem.Reducing the number of hours/shifts given to employees, increasing the cost of their product so the increase is passed to customers, negotiating better rates with suppliers and making redundancies are some of the ways in many employers are dealing with this.
Is that wrong? Or is it acceptable to keep your margins the same by passing on the problem?
For more from Jay Bhayani, see:
I would love to hear your thoughts. What are you doing in your business to deal with the National Living Wage? Login or sign up to comment.
