On 1st April 2016, the government’s National Living Wage Policy came into effect. Employers are now obliged to pay staff over the age of 25 a minimum salary of £7.20 per hour. Turner Little looks into the what the policy will mean for UK small to medium-sized enterprises (SMEs).
Cost for SMEs
SME Insider recently reported on new research from payroll services firm Moorepay which suggests that the National Living Wage will impose a far higher bill than expected on British companies. Moorepay analysed data from 4,500 UK SMEs, discovering that the introduction of this policy will allow eligible staff to earn over £950 extra per annum.
More than 1.7 million UK employees are now eligible to receive the National Living Wage. With this in mind, Moorepay estimated that the cost of the policy to businesses will be around £1.67 billion, far higher than UK companies expected. According to Moorepay’s research, 86% of UK SMEs had no insight into how the introduction of the National Living Wage would impact their bottom line. One in three were not aware when it even came into force.
Plan for changes
Speaking before the policy came into effect, Moorepay Managing Director Alison Dodd said: “Our research shows that many SMEs are apparently still unaware of the impending introduction of the National Living Wage. What is more worrying is the number of companies that have little understanding of the financial impact this change will have on their business.
“It’s not just the higher wages bill that will affect their bottom line but the associated costs, such as national insurance (NI), pension contributions and overtime pay.” Moorepay advised UK small businesses to plan around these rising costs, to ensure they conform to new regulation. With the National Living Wage set to increase to £9.00 per hour by 2020, the firm suggested that SMEs budget for a minimum of 45p per eligible employee, per year, to ensure they remain compliant.
Turner Little
The National Living Wage will be introduced over four years. If you are a UK-based SME owner, it is vital that you plan your firm’s finances in order to implement the policy in the long-term and ensure your enterprise remains profitable. Ensure your firm has the financial infrastructure in place to handle the monetary burdens associated with implementation of the National Living Wage.
As registered bank intermediaries, Turner Little can advise you on utilising UK banking services to fulfil your company’s financial obligations. Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider.
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