From this Friday, businesses of all sizes will be required to pay their employees the new National Living Wage (NLW) which is set at £7.20 per hour.
The introduction of the NLW was announced by the Chancellor in the 2015 summer Budget and is intended to support the Government’s vision of a higher wage economy. According to official figures, over a million workers in the UK aged 25 and over are set to directly benefit from the increase. There are derogations for those aged under 25 and those completing apprenticeships.
Whilst the living wage is good news for workers, it means that SMEs will need to adapt their finances to accommodate higher wages for their workers over the age of 25. However, SMEs must not think of this as a one-off, as the National Living Wage will continue to rise on an annual basis with the Government targeting a rise to £9 per hour by 2020.
SMEs told us in our most recent SME Confidence Tracker that their top investment priorities between Q4 2015 and Q1 2016 are their existing staff. Whilst this clearly demonstrates SMEs’ ongoing commitments to employees, the NLW will place additional pressure on smaller businesses to make sure they are both compliant and in good financial shape to respond to the increase.
In order to adjust to the new rules for paying the National Living Wage, SME owners should think about their current and future funding requirements. It’s a good idea to think about some of the following when planning your finances:
- Is my business experiencing cashflow problems and do I need to take action to address these?
- Can I realistically adjust to further increases in the National Living Wage in the future?
- How will my monthly outgoings be affected by the NLW?
- Do I have all the information I need on the requirements of paying the NLW?
For more information about the NLW and to ensure you are compliant, visit livingwage.gov.uk which includes four steps that employers need to go through ahead of the rise on 1st April.
Alternatively, if you need to get your finances in order, find out how we can help you to unlock cashflow tied up in your business at www.bibbyfinancialservices.com.