How will the National Living Wage affect my business?

With the new mandatory National Living Wage (NLW) for workers aged 25 and above set to come into force from April 2016, have you prepared for the changes? If your business is affected, it could impact on more areas than purely the cost of paying your staff enough to meet the NLW target. It could also affect how you pay your staff, employee morale, employment law, internal communications and recruitment.

How does the National Living Wage work with the National Minimum Wage?

The adult National Minimum Wage (NMW) rate is currently £6.70 per hour. From 1st April 2016, the National Living Wage will come into effect on top of the NMW, taking the national living wage to £7.20 for those who are 25 and over.

The NMW still applies to those under 25 years old, but without the NLW premium.

How does this affect my business?

With the changes due to affect at least 20% of businesses (November 2015 report from the Resolution Foundation and the CIPD, polling 1,037 employers), you need to consider the implications of the NLW wage now.

There will be extra costs generated by NLW implementation, payroll costs and forecasting, and a considerable impact on your recruitment policies. You may need to:

  • Cut back on discretionary payroll costs, such as bonuses and overtime,
  • Consider not filling vacancies, and reducing how many people you need to hire,
  • Boost productivity and efficiency in your employees.

However, there will also be implications for employment law for those looking at these areas to cope with the extra financial strain of the NLW. If you are looking at reducing your workforce through redundancies, this needs to be considered carefully (look at my previous blog post on Redundancies for more information). Focusing on hiring people under 25 to reduce costs could also lead to age discrimination claims so clear HR/recruitment policies must be in place.

What next for my business?

With the implementation date fast approaching, you need to consider the impact of the National Living Wage now. Will it affect your business? How will you cope with the associated costs? Have you checked and revised your HR Policies and any employment law issues?

To find out more about how the NLW could affect your business, contact me today.

More information about NLW

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