Every April, the National Living Wage and National Minimum wage increases, largely in line with inflation.
This year, however, the National Living Wage is set to rise by a huge 6.2%. That’s more than four times the rate of inflation.
The government says it’s “the biggest cash increase ever”. That’s good news for employees who are paid this minimum wage, but it’s not so great for businesses who’ll need to front the extra costs.
What is The National Living Wage?
The National Living Wage is the minimum wage that must be paid to any employed adult over the age of 25. For those aged 24 and under, the National Minimum Wage still applies.
At present, the National Living Wage is £8.21 per hour.
In April 2020, this will increase to £8.72 per hour. For those under 24, the National Minimum Wage will increase to:
- £8.20 for 21 to 24-year-olds – a 6.5% increase
- £6.45 for 18 to 20-year-olds – a 4.9% increase
- £4.55 for under 18-year-olds – a 4.6% increase
- £4.15 for apprentices – a 6.4% increase
Most people above school leaving age will be entitled to the National Minimum Wage or the National Living Wage. However, there are some exceptions, including company directors, students on placement and volunteers.
What does this mean for my business?
From April 1st, if you employ staff your wage bill will rise.
This is the largest increase in the National Living Wage since it was introduced, and so your business will feel a sharp increase in costs too.
Businesses groups have warned the Government that this steep rise in wages will put pressure on companies and have urged them to reduce costs elsewhere.
Although a rise in the National Living Wage is intended to help workers, the danger is it can put too much strain on small businesses. They have to increase their prices, which may lose customers. Or they have to cut jobs or scale back on equipment, technology and training.
This is not the outcome anyone wants.
Businesses will have to contend with further increases next April, as well as a 1.7% rise in business rates. Many small firms will need support.
If you need help organising your accounts to ensure you have the adequate cash flow for these wage increases, please do not hesitate to get in touch with Suzanne.