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national living wage header

The trouble with the National Living Wage

Ten months after the introduction of the National Living Wage (NLW) at £7.20 per hour for workers 25 and over, the government released a list naming and shaming the companies underpaying their staff entitled to NLW. Companies such as Debenhams, Heron Foods, St. Mirren’s Football Club etc. were named on the list for underpaying their staff after the introduction of the NLW in April 2016.

Most of these companies have now been fined as a result of this and the companies have been forced to make good on all wages owed. Excuses for this underpaying of wages include docking wages to pay for the Christmas party and making staff pay for their own uniforms out of their salary.

Fines and this public naming and shaming will potentially hurt smaller businesses, many of whom are struggling to deal with the effects of the NLW on their finances as it is. Although, the majority of company bosses up and down the country support and believe in the NLW and staff earning more, it is a difficult pill to swallow for those who feel that this is the worst time for them financially.

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The issues with the NLW for employees are wide ranging and though they don’t outweigh the benefits of a higher wage for those over 25, they can become an issue for workers. Some companies are dealing with the rise in wages for those over 25 by cutting wages for those under 25, cutting hours for all staff, increasingly focussing on productivity which puts staff under more pressure and letting some staff go to streamline costs.

The sectors that have been affected the most by the introduction of NLW include the care industry, retail, hospitality, cleaning contractors and food industry. These sectors have been notoriously low paid and they have seen the biggest squeeze in their finances because of this. With the NLW set to rise again in April 2017, to £7.50 from £7.20, businesses will need to prepare themselves for a further strain on finances.

For many businesses, it is not a fall in profit which is the main issue but the struggle they currently have to pay staff wages and the rising cost of their liabilities due to inflation and the fall in the pound. Many company directors are now looking for other ways to cut costs, they are thinking more carefully about taking on new staff and they are worried about how the current economy and events like Brexit will affect them.

Neil Westwood, owner and managing director of Magic Whiteboard, spoke to The Guardian about how his business is handling the NLW; “In principle, we have no issue paying the living wage. It is the timing of this that is a problem for businesses… When the economy is good and sales are increasing, businesses can afford this extra cost. The problem is that the economy is not growing at the moment.”

Although, the NLW is a good thing in theory for many workers out there who have been working on significantly low pay for years, which has stopped them saving, buying a house or meeting monthly bill payments, in practice it can be difficult for some businesses and employees. As the NLW is set to rise again this April it remains to be seen if businesses have prepared more for this next wage rise and how it will affect thousands of businesses, big and small, across the UK.

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