At this point you’ve heard a lot about the upcoming Living Wage changes in April, but you still may be unsure of how this change will impact your business personally. Here’s a quick rundown of how these changes will affect employers.
The obvious part of all this is that employers will now be legally required to pay employees who are 25 or older £7.20/hour for their work. That number isn’t quite as simple as it sounds though, because a great deal of information goes into determining whether or not a wage actually meets this minimum. The government has outlined that businesses must individually evaluate a complex amount of data for each employee, taking into account income tax, insurance, wage advances or loans, the type of work the employee does, and how they are paid when it comes to making sure the living wage is met. That’s just the start.
The Living Wage Movement claims two major benefits to employers who pay a living wage: Less absenteeism and increased clientele. According to their website, companies that pay employees a living wage see employee absenteeism fall by around 25%. This means cheerier and more dependable workers employed in your business and that you save money in the long run. Less overtime is spent covering workers. Employees are less likely to quit their jobs for a more stable option, which cuts training costs and recruitment. All of this is better for business profits.
How does paying a living wage affect your customers though? The Living Wage Movement claims that 70% of UK adults would rather shop at businesses that are paying their workers a living wage. If that’s the case, by proudly paying your workers well you could be winning customers and building your reputation in the community. You would be joining an already impressive list of companies that are doing just that.
Employers are keenly aware of the negative effects that paying workers more could have on their business. That being said, if the proposed benefits don’t happen, what are the downsides employers could be looking at?
In a long list of potential options, the one that most businesses are considering is to simply cut costs. What this means is additional training, updated equipment, new hires, and employee accommodations are all subject to get the axe. In the same vein, the Office for Budget Responsibility estimates that 60,000 jobs could be lost directly as a result of the living wage. That may not sound like a lot compared to the 6 million this change is supposed to help, but try telling that to the people whose jobs end and the businesses that will be letting them go.
It is also feared that companies will be forced to raise prices on their products to stay afloat, which could lead to further concerns about the economy in the years to come. The truth is that nobody knows how this will actually work out in the long run, and many business owners are getting feverish in their desire for some kind of positive certainty. What can be done then?
What You Should Do
Thankfully, businesses aren’t without guidance on what to do to make this transition smooth. The government recommends businesses check their employees for eligibility and take the appropriate payroll action as soon as possible. Services like ours here at The Pay Pod can help with your payroll and see you through this transition. We want to help you keep your mind on business as usual.