National Living Wage: Cost of employing people hits a new high

Businesses must make sure their employees are earning what they’re legally entitled to, but is this getting difficult for smaller businesses struggling with the increased cost of employing people? 

If you didn’t already catch it in our People Matter newsletter, or on the radio, or the television, or anywhere else for that matter, from April 1 the Statutory Minimum and National Living Wage rates for employing people have increased.
The increase is across the board, affecting apprentices to workers of all ages. The rates are listed below*.
Annual increases such as this play an important role in ensuring the welfare of the lowest paid in our society. Paying your staff well for what they do is a no-brainer if you want to attract and retain talent; money isn’t the key to happiness, but it helps get them to turn up!
Managers of small businesses, more often than not, would love to be able to offer their staff more for their work. It’s just not always feasible. So when the legal minimum goes up, small businesses are going to be first to feel the pinch.
Businesses need to adapt to their environment to survive. Your wage bill is increasing.
Not paying the increased rates is not an option, so what’s your strategy going to be?
Dismiss staff that qualify for the National Living Wage.
No! This is not an option either. Do this and your employees will be able to claim automatic unfair dismissal. Employment law prohibits employers dismissing their staff for qualifying for any minimum wage bracket.
Make redundancies to off-set the impact of the raise.
Be careful. Redundancies are valid if there is a genuine business case and it is the roles not the people who become at risk of redundancy. If you were to target workers entitled to the National Living Wage (aged 25 and up), tribunals would very quickly see this as a sham. Age discrimination might ensue with unlimited compensation!
Use gig workers
As the cost of employing people has risen, so have the amount of so called self-employed workers in the economy. Businesses using these “pretend self-employed workers” like Uber and Deliveroo avoid paying NI contributions, wage obligations, employment rights, and auto enrolment too.
This hasn’t worked well for them. Uber drivers took Uber to tribunal for workers’ rights and won, as have City Sprint. There are more cases in the pipeline. The government are looking into this area. We at The HR Dept actually went to Parliament to give our thoughts on behalf of small businesses.
Improve productivity
Good idea. Simple ways of improving communication can improve productivity as can the benefits you offer. Many benefits such as cycle-to-work schemes and healthcare cash plans benefit the employer and the employee. They are really cost-effective as a motivational tool.
Fail to pay the new rates?
Not a good idea. You could be fined up to £20,000 per worker on top of their due wages. Arguably worse is the stockade: the government is actively naming and shaming employers that fail to pay their employees properly, proving that some bad publicity really is bad publicity.
The rates rise annually, so this isn’t a one-off. SMEs need to factor these costs into their plans and have a strategy for dealing with them. We can help you to find yours. Get in touch.

*APRIL: National Living Wage hourly pay rate – £7.50 for workers aged 25 and over. National Minimum Wage hourly pay rate – £7.05 for workers aged 21 and over, £5.60 for workers aged 18 to 20, and £4.05 for workers aged 16 to 17. Apprentice minimum wage £3.50 per hour (apprentices under 19 or 19 and over who are in the first year of apprenticeship).

SHARE
Previous articleNew rules for retailers: Purchase and supply of vapour products
Next articleScots employees save £54,000 on Workplace Journey Challenge
Ian heads up the HR Dept Edinburgh & the Lothians team. The HR Dept specialises in helping SMEs with everything to with employment, through a local and personal service delivering practical and pragmatic advice and support. With nearly 30 years HR experience, Ian has a wealth of experience in helping businesses to ensure success through their people, be legally compliant and handle tricky people issues. As a business owner himself, Ian understands the challenges that come with running and growing a business. He is known for his ability to explain complex concepts simply and to make learning fun and enjoyable.

NO COMMENTS