Living wage will hit struggling employers

THE introduction of the national living wage is good news for the low paid but worrisome for employers struggling to make ends meet.
From April 2016 over 25s will be entitled to the national living wage of £7.20 per hour; an increase of 70 pence per hour from the current rate of £6.50. The national minimum wage increases annually but generally the increase has been under 20 pence per hour.
By 2020 the increase to £7.20 will seem insignificant compared to the expected national living wage of at least £9 per hour; an increase of over 38 per cent in four years.
While many employers already pay more than the current national minimum wage, in some sectors minimum wage is the norm. Salaries are typically the biggest cost for care homes and such changes could be disastrous if the fees they receive from local authorities for state-funded residents don’t keep pace with the living wage.
Smaller retailers and businesses in the leisure and hospitality sector could be similarly affected and owners may find themselves spending more time working in the business to reduce staff costs.
Across all sectors we may see employers reacting to the national living wage by employing more under 25s at a cheaper rate. Unfortunately today’s youth face a ‘double whammy’ in the shape of low pay (until they reach 25) and increased university tuition fees of £9,000.
Employers should take an early look at how the national living wage will impact their payroll and how that impact can be minimised with some careful planning.