The National Living Wage (announced by the Chancellor in Budget 2015) is due to be introduced from April this year to £7.20 per hour for over 25 year olds. This could potentially cost small businesses as much as £2 billion, so planning cash-flow will be key for small businesses, especially as the National Living Wage is set to rise to £9.00 per hour by 2020.
The cost to business is likely to be significant, especially for businesses who are reliant on part-time workers such as the tourism and hospitality sector and those in the care sector.
From an employee’s perspective the Government have put a very positive spin on this announcement but for business owners this could have negative repercussions. Many businesses fear that they will be forced to make redundancies to manage ever increasing salary costs. This comes at a time when the Government are also ensuring employers provide pensions for employees through Auto-Enrolment. Many employers have still not yet gone through the Auto-Enrolment process and may have no idea of the impact of the cost increases that face them.
The wage hike will affect workers aged 25 and over, and is reportedly set to boost the salaries of over six million people. The National Minimum Wage rates will stay the same for workers aged 24 and under.
For advice on how this can affect your business and help with cash flow management and forecasting please contact us on [email protected]