There has been much noise about the raising of the Living Wage on 1 April. While trade unions understandably consider the move a triumph, business owners are genuinely worried that their businesses will struggle to meet the new pay threshold.
Here are the facts:
– If you employ a worker aged 25 and over, who is not in his or her first year of an apprenticeship, you are legally entitled to pay them at least the National Living Wage. Until 31 March 2017, this was £7.20 per hour. From 1 April 2017, it went up to £7.50 per hour.
– If you employ someone currently earning less than £7.50 per hour, they should’ve automatically seen an increase in their pay after 1 April 2017. It is illegal for you, as an employer, to pay below the National Living Wage.
– If you employ a worker under 25, or an apprentice, they are legally entitled to the National Minimum Wage. For 21 to 24 year olds, this has risen to £7.05 per hour, for 18-20 year olds £5.60, for under 18s £4.05 and for apprentices £3.50.
Businesses need to be prepared for yearly increases in the National Living Wage. When it was launched by then-Chancellor George Osborne the Government pledged that it would rise to £9 by 2020 for those aged 25 and over.
In 2018, it will rise to £8.05 an hour, followed by a hike to £8.50 an hour in 2019, until it eventually reaches £9 an hour in 2020.
It is estimated some one million workers will benefit from these measures.
While we appreciate the need to reward staff for their hard work, these extra costs will hit businesses hard.
The Government should take into account that employers have additional costs to pay for staff, such as employers’ National Insurance Contributions, pensions, sick and maternity pay and holiday cover. All of these combined with a relatively small rise in in the National Living Wage can create cash flow problems for companies running on tight margins.
What we are calling for is the Government to find ways – such as reforming the failing business rates system – to help businesses with these extra costs, while at the same time letting responsible businesses reward their staff with the National Living Wage.