In this year’s summer budget Chancellor George Osborne set out a number of plans for UK businesses. One in particular caught the attention of business owners and employers, that being the increase to the statutory minimum wage. The budget announced plans to boost the national minimum wage to £9.00 per hour by 2020 in response to calls by the public that the current rate was simply not enough leaving employees overworked and underpaid.

Unsurprisingly the rise to the minimum rate of pay has not been welcomed by a large proportion of employers, particularly those in the retail and hospitality sector. Despite protests from large corporations the Chancellor maintained that an increase to the basic rate of pay would have only a fractional effect on businesses and employment.

However the greatest concern has come from SME’s and independent retailers who fear they may have to cut already small work forces to account for the increase to the minimum wage. Industry experts have also argued that the rise to basic pay will be felt by the consumer resulting in an increase in prices to account for the additional salary costs.

Amidst the speculation from both sides the true impact of introduction of the living wage will not be fully realised until the legislation comes into effect next April. It is also worth remembering that employers initially campaigned against a similar proposal in 1999 arguing against the introduction of the national minimum wage on the basis that it would be detrimental to businesses and the retail sector. This fear was later proved to be unfounded.

In the mean time businesses can prepare themselves for the implementation of the living wage by restructuring their payment and staffing structures, including reviewing employee benefits such as internal discounts. It is also worth bearing in mind that the national living wage will only apply to employees aged 25 and over at the beginning rate of £7.20 per hour, with those businesses employing young adults remaining largely unaffected by the changes. Even for those businesses that will be affected by the increase, in theory a raise in pay should have a knock on effect on the amount of money that goes back into the local economy resulting in a rise in sales.

If you are concerned on how the introduction of the national living wage is set to affect your business please don’t hesitate to contact Farleys Solicitors specialist Employment Law & HR team on 0845 050 1958. Alternatively please complete an online enquiry form.