Advice from the FSB: What does the new National Living Wage mean?

p14 fsb Simon Edmondson2
Simon Edmondson

The Federation of Small Businesses is the UK’s largest campaigning pressure group promoting and protecting the interests of the self-employed and owners of small firms. Formed in 1974, it now has around 200,000 members nationally, 5,000 of those in Greater Manchester and north Cheshire.

Simon Edmondson, FSB Regional Chairman, writes…

EARLIER THIS year the Chancellor used July’s Emergency Budget to announce quite huge changes to the system which tells employers how much they must pay staff.

The FSB is a long standing supporter of the Minimum Wage and we’ve always been very clear employers must make sure they meet this important legal obligation.

The introduction of the new National Living Wage is the most radical change to wages in recent years, even introducing a completely new wage bracket for the over 25s.

We’re starting to hear murmurs of discontent from some of our members about yet more staff costs to bear.

And they have a point because small businesses are already having to contend with the massive changes to pensions law in the form of enrolment, which is now starting to affect the smallest of UK firms.

At some point between now and 2017 hundreds of thousands of small businesses will find they have a sizeable pensions contribution to make that previously they hadn’t factored for. In many cases it could be a fairly significant staff cost.

Only earlier this month there was a new European ruling that says mobile workers’ first and last journeys of the day should be included in their working hours. Yet again, another ‘extra’ on the wage bill for many.

And then next April we have the introduction of the Living Wage, which will see per hour wages increase from the existing £6.50 to £7.20. By 2020 that figure will have swelled to £9.

Let’s assume a business employs four people, all on the current minimum wage, working 37.5 hours a week. The monthly staff bill will shoot from £4,225 to £4,680.

Over a year that’s almost £5,500 extra, which will have implications for some businesses who’ll decide they can’t afford to take that extra member of staff, or the part-time Saturday worker.

The voices of dissent will get louder between now and April. Before then though we must see the Government clearly and proactively communicate the change to employers – ensuring businesses fully understand what they need to do – and when. This support and guidance is necessary so small businesses avoid inadvertently falling foul of the changes to the law.

In addition, ministers should review the Employment Allowance, which must be set at the right level to help businesses meet the new requirements and make sure all eligible businesses are getting the correct NI reliefs.


One Reply to “Advice from the FSB: What does the new National Living Wage mean?”

  1. It is very frustrating that so many organisations are still confusing a minimum wage, and a living wage. The clue is in the name. A living wage would allow the person earning it to live a decent life and pay their own bills without needing to be subsidised by the government in some way. I would suggest that if an employer is not able to pay a wage at that rate then they need to look again at the viability of their business.

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