Tony Wilmot considers the imminent changes to minimum wage laws.
There has been much noise about the rise in the Living Wage. While trade unions consider the move a triumph, business owners are worried that their businesses will struggle to meet the new pay threshold.
Chancellor George Osborne has announced changes to the compulsory National Living Wage from April next year for workers over the age of 25. The initial rate will be £7.20 per hour, rising to £9 per hour by 2020.
Let’s look at some figures. My company, Staffbay.com, is headquartered in Nottingham in the East Midlands where research from KPMG shows around 451,000 people are paid less than the Living Wage. That’s 26% of all employees in the region – 3% more than the UK average. This puts the East Midlands in joint second for low earners, alongside the West Midlands, Wales and Yorkshire and Humber. The highest proportion is found in Northern Ireland, with 29%. Implementing the new National Living Wage will add about 3% to local employers’ wage bills, according to a study by the University of Lincoln.
The analysis shows marked differences between the major industrial sectors. Jobs in retail, agriculture and health & social care will be among those most profoundly affected. Almost half of employees in the food and hospitality industry would see wages rise, with a percentage cost increase to employers of more than 10 per cent.
Everyone wants to see workers paid enough to live on, but the raising of the Living Wage poses a conundrum. Successive governments have long been criticised for the number of NEETs (not in education, employment or training) in the UK. When the Living Wage is introduced it will undoubtedly hit the bottom line of companies who employ people over 25.
Will they stop taking on those over 25 and turn, instead, to the younger members of the workforce who are exempt from the Living Wage? Will this in turn lead to legal challenges from disgruntled over-25s who have been shown the door? What choice, in essence, do companies have if they want to remain profitable?
For business owners, the Living Wage looks like it will continue to raise more questions than it answers. Until we see who it actually benefits, businesses have every right to be sceptical.
Tony Wilmot is the co-founder of staffbay.com.
Author: Megan Jones
Published On: 13th Jan 2016 - Last modified: 22nd Mar 2017
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