Retail employers urged to plan now for future costs of National Living Wage
The new national living wage has been met with mixed reactions from employers, with some believing it to be unrealistic and unaffordable while others maintain it is fair and attainable…. By Gavin Matthews of Bond Dickinson.
Whatever their views, retailers need to have plans in place sooner rather than later that will actually tackle the increased cost in their wage bills.
As announced in the Summer Budget 2015, the Government will implement the national living wage from April 2016, ensuring an increase in pay for those aged 25 and over. The Chancellor intends that it will take effect incrementally, with gradual rises until 2020 when it will reach £9 per hour. As one of the biggest employers in the UK with a large proportion of lower paid workers, the retail sector will be heavily affected. In fact a report by PWC claims it could cost large retailers an extra £25.6 million on average by 2020.
The first change employers need to be aware of is in April 2016, when the minimum hourly rate for employees aged 25 and over will increase from £6.70 to £7.20. Notably, the national living wage will not apply to adult workers aged under 25 and this group will continue to be entitled only to the national minimum wage, which is currently £6.70. Employers will be required to pay a minimum of £9 per hour by 2020.
It is also important to distinguish between the national living wage announced by the Chancellor in his Budget and the living wage, which is an aspirational target that employers can voluntarily endorse and pay – promoted by action group the Living Wage Foundation. The Foundation claims 70% of employers believe that the living wage policy has improved the face of their organisation in the eyes of the consumer, bolstering their image as an ethical employer.
Clearly some retailers think that the reputational advantage of signing up to the living wage or announcing pay rises above the national living wage before it comes into force is worth an increased wage bill as some have already done so.
Regardless of views on this, the national living wage will be coming in soon and planning to mitigate extra costs, whether this is through increased productivity, reducing costs or taking the time to review ways to improve efficiency, should be front of mind for all retailers.
