The New National Living Wage of £7.20 might come as a shock to businesses that haven’t prepared well in advance. Many employers are currently in the process of planning pay restructuring to financially accommodate the introduction in April 2016.
Employers canvassed in a survey by PriceWaterhouseCoopers said they will pay an extra £1.6m in wages next year because of the National Living Wage (NLW).
The Cost To Business
Well considered strategic and structural long term plans are needed as cost increases are set to keep rising. The National Living Wage is planned to rise to £9 per hour by 2020. Organisations which have large numbers of staff earning below the planned NLW will be the most affected. These are set to see wage bills spike by £2.3 million pounds next year.This is clearly a major consideration for those employers with workforces currently being paid at or near the current minimum wage. Almost a quarter of businesses surveyed by PWC said their workforce is currently paid less than £7.20 an hour, while almost 40 per cent said staff are paid under £9 an hour.
[Read our blog: Is the jobs market suffering a National Living Wage shock?]
How To Handle The Wage Hike
One way of handling the new financial strain is to pass on the proportionate amount of cost to customers. Nearly a third of PWC’s survey respondents said this would be their preferred method. Meanwhile, just over a quarter conceded that they are planning to make redundancies and streamline staffing.There are other considerations in addition to direct wages. Organisations should also pay heed to broader changes expected in the upcoming years. These include pension auto-enrolment contributions, holiday pay, the apprenticeship levy and gender pay gap reporting.While it may be a headache for some, the new National Living Wage might not necessarily be considered as an altogether bad thing provided you have all bases covered. It might encourage businesses to confront pay issues which have long been burning away in the background. A healthy and open revision of pay structures can help to refresh and realign teams and overall business objectives. Not simple or quick, perhaps, but it can be good to ‘grasp the nettle’ for the good of the long term.
Will Your Sector Be Affected?
Plenty of businesses will be compelled to plan and make changes in advance of the National Living Wage introduction, but not all. There’s a considerable number of employers in construction, care and right across the board, already paying hourly rates which are comfortably above the new living wage, so there will be less of an impact.However, the PWC report said retail, healthcare, hospitality and leisure, transport and logistics sectors will be most hit by the wage bill hikes.Wherever your business fits, it’s worth a comprehensive check of the current wage structure throughout your organisation, well ahead of the new National Living Wage introduction.If you’re seeking new staff in office administration, care, catering or construction, please get in touch with us at Atlantic Resource.
