Friday 15th April will go down in history as an important day in British legislation. It was the day when the National Living Wage, a subject of much recent speculation, scrutiny and debate, finally came into effect.
Of course, the news is great for UK workers. Since the 15th, any employee over the age of 25 is guaranteed a minimum hourly rate of £7.20 per hour. This increase in the national minimum wage has understandably been greeted with cheers by millions across the country, but some business owners are reacting with a little more scepticism.
CASH FLOW CONCERNS
Company stakeholders and directors have voiced concerns that being obliged by law to pay their staff higher wages has the potential to strangle business growth, diminish funds for resources and create cash flow problems. Others believe it will prove to be less troublesome. But what about your business? How will the new National Living Wage affect your company, and what can you do to safely manage your business as a result of this change?
ACCOUNT FOR COSTS
First of all, it’s important to understand exactly what you owe and budget accordingly. The National Living Wage is payable from April 1st. It’s important to take stock of staff payments from this point forward and implement the changes; otherwise, you risk incurring non-payment penalties or even being taken to court by a member of staff. Everyone on your payroll needs to be accounted for, including casual workers.
The National Living Wage only applies to workers aged 25 and above. Any worker below this age will not be eligible for this new rate. It’s also important to remember that the National Living Wage is not the same as the wage set by the Living Wage Foundation. The National Living Wage is the new name for the UK Minimum Wage, whereas the Living Wage Foundation is an organisation that makes suggestions on what a company ought to be paying employees. The National Living Wage is enforced by law. The Living Wage Foundation wage is not. Confusing? A little. Important to differentiate between the two? Very.
PLAN FOR THE FUTURE
Secondly, it’s also important to use this new legislation as a way to ready your business for the future. The National Living Wage will rise to £9.00 by 2020, so looking at ways to prepare for that right now will ensure your company doesn’t run into further complications further down the line when minimum wages increase once again.
Experts are predicting that the introduction of the National Living Wage will not spell disaster for the British economy, even if several businesses will be forced into making cuts initially. By planning accordingly, you can ready your company for the increase and ensure your business remains profitable.
NEED HELP?
If your business has been affected by the new National Living Wage and you are searching for expert accounting advise, get in touch with UWM. You can call today on 0113 231 0202 or complete our quick and easy contact form and a member of our team will be in touch soon.
