National Living Wage and its effect on businesses


The HR department

George Osborne warns firms not to scrap perks to pay for National Living Wage

National Living Wage is live with a 50p increase over minimum wage

It’s expected to rise to £9 per hour by 2020

Organisations facing a challenge to find the extra money

In 2015 George Osborne announced that “Britain deserves a pay rise” and this April the National Living Wage was introduced. But many employees are finding out that there is no such thing as a free lunch as bosses reduce overtime, cut bonuses and yes, in some cases, take away free food that had hitherto been offered as a perk.

While George Osborne has made it clear that he is not amused, it must be acknowledged that this has not been an easy measure for businesses to adopt, nor have they had much time to plan.

The HR Dept sum up the impact and look at two contrasting approaches: “There is no doubt that some sectors will feel the strain in budgeting for it: care homes, service industry and retail and SMEs for instance. It’s going to cost money. Whitbread (who own Costa Coffee and Premier Inn) have been quoted as saying £20 million a year for them. For businesses in Hampshire the question is: where is that going to come from?

Restructuring the overall pay packet is one option, but quite a negative one if it is no more than taking away with one hand what was given with the other. As well as the ire of Mr Osborne, it may lead to bad publicity and a talent drain, if staff feel hard done by and think they will do better elsewhere.

A more positive approach could be to plan for increased productivity from a happier, better motivated workforce. Research cited by the Living Wage Foundation (not connected to the National Living Wage) suggested that paying a living wage could lead to improved staff performance, better retention and reduced absenteeism.

The National Living Wage is here to stay and will increase significantly in coming years. The HR Dept can help businesses plan carefully to consider the bigger picture – like reputation, recruitment and retention of talent, and overall productivity – to not only survive, but thrive under the National Living Wage.

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