A third of SMEs unaware of National Living Wage start date
The new National Living Wage (NLW) will become a legal requirement for employers from 1 April 2016, but despite the closeness of the deadline, a third of small and medium businesses in the UK said they were unaware of the date on which the changes are to be implemented.
From the implementation date, all workers aged 25 or over will be entitled to a minimum of £7.20 per hour. This is an increase from the current National Minimum Wage (NMW) rate of £6.70, which applies to employees aged 21 or over. The NMW will continue to apply for workers aged 24 and under.
According to the research, by payroll and HR services provider Moorepay, a large majority (86%) of SMEs also said they were unaware of exactly how the changes would impact their finances.
Increases to basic wage rates would not be the only element to have a potential impact on a company’s bottom line, as there may be other the associated costs, such as national insurance, pension contributions and overtime pay.
The research suggested the additional costs to SMEs of the National Living Wage would be an estimated £1.67 billion. The UK’s 1.7 million eligible employees would each earn an average of £950 more each year.
With the NLW expected to increase to £9.00 per hour by 2020, businesses are being advised to budget for a minimum increase of 45p per hour each year until the 2020 deadline to ensure they remain compliant.
Research published by the Federation of Small Businesses (FSB) last year showed that over a third (38%) of smaller employers expected the introduction of the NLW to have a negative impact on their businesses. The FSB said that higher enforced statutory wages could lead to fewer jobs being created, fewer hours for existing staff and, in some cases, to job losses. In extreme cases it could also lead to some smaller businesses facing administration if they are unable to cover the increases.
By Phil SmithView all Business Insights