The impact on businesses of the introduction of a National Living Wage was not considered properly by the Government, a poll by a regional law firm has discovered.
Napthens solicitors carried out an informal poll of businesses across the North West, asking for their opinion on aspects of the new National Living Wage, which came into force on April 1.
From this date, anyone in work aged 25 or over and not in the first year of an apprenticeship is now legally entitled to at least £7.20 per hour. This will increase each year and is expected to be £9 per hour by 2020.
The Government has warned that the living wage will be enforced in the same way the National Minimum Wage is (by HMRC), and employers must make sure staff are being paid correctly failing which they face being fined and ‘named and shamed.’
A survey carried out among clients of the Employment & HR team at Napthens solicitors found that 95% of employers understand the living wage, but are split over whether it will have a positive (47%) or negative (53%) impact on businesses.
Almost three quarters, or 74%, said the impact of the living wage would have an upward pressure on wages across their staff (to maintain pay differentials), but 58% backed the introduction, agreeing it was the right thing to do.
However, 84% of respondents felt that the Government failed to consider the impact on businesses properly before introducing the policy.
Oliver McCann, Employment partner at Napthens solicitors, warned there is still confusion over the living wage and advised employers to take advice or risk falling foul of the new law.
He said: “Our findings broadly reflect national surveys from the likes of the Federation of Small Businesses. Many are agreed that the introduction of a living wage is a good thing, but it will undoubtedly have an impact on the business community which will absorb the impact of these higher wages.
“As the wage goes up each year, by 2020 when the wage is expected to be £9 per hour, small businesses and the care sector in particular will face a large financial burden.
“There are also plenty of practical considerations from payroll issues to employee relations problems and an impact on recruitment policies – businesses may face age discrimination claims if they are recruiting under-25s to avoid the new living wage, for instance.
“It’s also clear that to deal with the extra costs generated by the living wage, many businesses will either look to pass on the cost to consumers (32%), cut costs – possibly through redundancies (23%) – or change the terms of employment (43%). It has been reported that large organisations like Tesco and B&Q are already considering changing overtime rates and supplements for Sunday working.
“Businesses unsure of their responsibilities should consult their legal advisor for more information.”