Member Article

National Living Wage: The impact on SMEs

In response to the National Living Wage, coming into play on 1 April 2016:

Caroline Langron, Managing Director, Platform Black

“The Government’s new National Living Wage (NLW) comes into force today (1 April 2016), as part of its drive for a higher wage economy. The introduction of the NLW means that UK businesses will have to pay eligible employees a minimum of £7.20 per hour. It’s a welcome rise on the current National Minimum Wage and an important step for UK workers. However, SMEs will once again be left bearing the impact of this Government introduced change.

Over 50% of employers expect to be impacted according to a recent CIPD survey. The change relates to all workers over the age of 25, but those under 25 or undertaking apprenticeships will also be affected to some degree. Employers are worried about the impact that an increased wages bill will have on their businesses.

It will undoubtedly pose a significant cashflow challenge for all the UK’s businesses, and in particular SMEs who will have to find a way to foot the bill. With more cash heading out of the business and increasingly long wait times for payment from suppliers, SMEs are at risk of plunging into poor financial health.

Although the new NLW presents an important opportunity to motivate employees and could help organisations to boost productivity, business owners must start planning now as to how they will negate the impact of this rise. And with further rises to the NLW planned, as the Government seeks to raise it to £9 per hour by 2020, it reinforces the need to act now and not turn a blind eye to the issue. Firms must ensure they have a healthy supply of working capital to enable them to meet this increased cost, as well as being able to continue to invest in business growth. This is crucial if they are to sustain healthy businesses.“

For more information on complying with the NLW, visit: www.livingwage.gov.uk

This was posted in Bdaily's Members' News section by Caroline Langron .