How is the National Living Wage is expected to affect employers?
Since Osborne’s announcement during the Summer Budget of the introduction of the National Living Wage due to roll out in April 2016, there has been mixed feedback from employers across all sectors.
With some leading household companies such as Lidi, Starbucks and Amazon, already introducing the National Living Wage increase, others are left considering the true impact this will have on their business.
The professional body for HR and people development CIPD and the Resolution Foundation, have this week published findings from a new survey, exploring the affect the National Living Wage introduction will have on low-paying companies.
The survey completed by 1,037 employers, illustrates that over half (54%) of employers say the National Living Wage will have an effect on their businesses wage bill. Sectors such as retail and hospitality, will be the hardest hit with 79% of retail and 77% of hospitality businesses being impacted by the higher wage bracket. These figures are closely followed by two thirds of healthcare employers feeling the push.
When asked what employers plan to do in response to the rise in wage bills, the main feedback seemed to be:
• Improve efficiency and productivity of the business • Absorbing the cost, through lower profits • Reducing employee bonuses and overtime opportunities • Increase product/service prices • Reduce staffing through redundancies or slower recruitment – though this is more prominent within the public sector with 21% saying this is a route that they may take, with only 13% in the private sector.
In addition, 26% of businesses affected by the increase to the wage baseline, are planning to reduce the financial diversion between workers and supervisors/managers. Though this path is not being taken by all, with 20% of employers planning to maintain the pay differentials, this could create a positive ‘ripple’ effect’.
It is estimated that by 2020, 2.8 million workers will directly receive a pay increase based on the introduction of National Living Wage. In addition it is thought that 3.2 million workers who are currently above the threshold will benefit by companies maintaining the pay differentials.
With cuts to National Insurance and Corporation Tax due to take place, 28% of employers feel that these savings will offset a percentage of the increased wage bill, with 10% feeling that it will cover the full increase. Though this view isn’t supported, by all with many employers waiting until the full affect of the Taxation changes are in place before they comment.
With so many mixed views about the National Living Wage, it will be interesting to see if it will be a topic that Osborne brings up during the Autumn Budget next week.