The National Living Wage will rise by 6.2% from 1 April 2020. Almost three million UK workers are set to receive a pay rise, described by the Government as “the biggest cash increase ever”. Whether you employ staff on the National Living Wage or not, your business is likely to be affected. We look into the potential impact of the rise and what you can do. 

From April, employers will see a significant increase in the cost of paying workers the National Living Wage.

If you employ staff full-time on the National Living Wage, you will see an increase of around £1160 per annum (including resulting increases in National Insurance and pension contributions).

It might be tempting to ignore the headline if you don’t actually employ any staff, but all businesses will be affected in some shape or form. Whether the impact is felt directly, through payroll, or indirectly, by increases in the costs of goods and services you use, businesses across the UK will be grappling with how to accommodate this extra cost.

We also anticipate pressure from higher-paid workers, who have seen a massive erosion of the gap that once existed between their remuneration and that of ‘minimum wage’ roles. It is only a matter of time before we see workers pushing for equivalent or higher wage increases to try and maintain the traditional wage gaps between unskilled, semi-skilled and skilled workers.

Smaller businesses and family businesses, in particular, will be subjected to increases in input inflation that have not been felt over recent years.

Managing the impact of the National Living Wage increase

So, what can you do to manage cost increases linked to the rise in the National Living Wage?

·       Do nothing – just suck it up and absorb the costs.
·       Pass on the cost by increasing the price you charge for your goods and services.
·       Increase the capacity of your employees/workers.
·       Increase the capability of your employees/workers.
·       Reduce costs and increase efficiencies elsewhere in the business.
·       Cut the cost of employment, by reducing the number of employees/workers on the payroll bill.

Specialist HR advice

RfM HR Services can help your business understand and creatively plan for the effects of these and other HR challenges. Taking into account your business structure and goals, we will propose alternative ways of working to benefit your staff, put the right policies in place and keep your wage bill down.

To find out more and discuss how we can develop and implement HR strategies tailored for your business, contact our Lead HR Consultant Diane Johnson. Call 01772 431233 or email djohnson@rfm-more.co.uk to arrange a telephone or 1-2-1 consultation.