April is a month anticipated by businesses each year as the start of a new tax year. However what makes this April different is the introduction of the National Living Wage, which will affect many SMEs throughout the UK and the South West.
Here are the answers to the top 5 common questions surrounding the impending change to help you and your business prepare.
What is the National Living Wage?
The National Living Wage, which comes in to force on 1st April 2016, is a minimum wage limit of £7.20 for workers aged 25 and over.
Upwards of a million workers in the UK are set to benefit from the increase, which sees the current minimum rate of £6.70 rise by 50p
It is compulsory to pay any worker aged 25 and over the new National Living Wage, whilst the National Minimum Wage will still apply to those under 25.
National Living Wage vs Living Wage
The National Living Wage is not to be confused with the Living Wage, which is a voluntary hourly rate set by the Living Wage Foundation. It’s calculated against the cost of living, which stands at £8.25 outside of London, and is updated annually.
Will the National Living Wage increase?
Last year the Chancellor’s Autumn statement indicated that the Government is committed to increasing the National Living Wage to £9 per hour by 2020, or 60% of UK median earnings.
However if the UK median earnings is higher than £9 at that date we could see the National Living Wage rise even higher.
What do I need to do?
Firstly, you will need to make sure you are paying all eligible staff correctly.
From 1st April 2016 the National Living Wage will roll out to all those who turn 25 in the proceeding months, and they will instantly become entitled to the new wage on the date of their 25th Birthday.
This has huge administration implications, giving payroll the important responsibility to implement an accurate and rigorous record keeping process that will make it easier to manage the already complex system.
How will the National Living Wage impact small businesses?
One of the biggest and obvious ways it will affect business, especially SMEs, is the huge financial adjustment businesses will have to make to pay more into wages. This increase in overheads will put pressure on some employers, squeezing cash flow, and potentially making growth a challenge.
However, the introduction of the National Living Wage has its positives, with the possibility to increase productivity and employee motivation, leading to better employee retention and lower absences. This in turn this can have monetary benefits for the business through a reduction in recruitment and training.
What next?
Looking for more information? Read the Government advice on the National Living Wage.
The HR Department specialises in outsourced HR and Health and Safety support to SME's in Bristol, Bath and North Somerset area.
For more information call 0117 970 2955, visit the HR Department website or connect on Twitter and LinkedIn.
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