The National Living Wage has now come into force, and in some parts of the country, a fifth of the entire workforce will benefit directly from the increase. It will mean a £900 cash increase for a full-time worker on the current National Minimum Wage and by 2020, 2.9 million workers are expected to benefit directly.
In addition, analysis launched by the Chancellor also demonstrates that the measure will provide a particular boost for women across Britain. It shows that the new National Living Wage is expected to eradicate the gender pay gap for the lowest paid by 2020.
The Chancellor said: “I said last year when I announced plans for the National Living Wage that Britain deserved a pay rise. Today, I’m proud to say Britain is getting one.
“So I’m delighted that 1.3 million people across Britain will benefit from the biggest wage increase in eight years thanks to the new National Living Wage.
“The National Living Wage will play a central role in moving Britain to a higher wage, lower tax, lower welfare economy. It will also mark the end of the gender pay gap for some of our lowest paid and hardest working people.”
Many companies will find themselves with a reduced safety net
Commenting on the new law, IGF Invoice Finance MD Tracy Ewen said: “SMEs have had time to prepare for the introduction of the National Living Wage and the impact it will have on their organisation. However, the practicalities of business remain as constant as ever with unexpected expenses frequently arising. Many companies will find themselves with a reduced safety net of cash as a result of their increased payroll bill, meaning sudden costs or short term investments could prove difficult to manage.”
She highlighted that it is crucial that small businesses are still in a position to meet these financial demands and, during this time of adjustment, all avenues of financial support are explored.
A limited contribution to the financial wellbeing of employees
Financial employee benefits provider Neyber’s chief strategy officer Monica Kalia welcomed the new law. She said it will “deliver for 1.3 million low paid workers. While this is a positive development it offers a limited contribution to the financial wellbeing of employees across the UK’s 30 million strong workforce.
“Analysis by the Trades Union Congress has found that unsecured debt, as a share of household income, is the highest it’s been for five years and that unsecured debt per household rose to £11,800 in the third quarter of 2015, putting per household debt at its highest ever level.”
Kalia believes that these figures demonstrate the scale of debt facing UK employees and the need for a greater focus on their financial wellbeing.
Why do people under 25 not deserve the same? #NationalLivingWage— Lucy Allen (@lallerrrn) 1 April 2016
A surprising number of small businesses are still oblivious
CEO of Moorepay CEO Alison Dodd comments: “A surprising number of small businesses are still oblivious to today's introduction of the National Living Wage. But what is even more frightening is that nearly 9 out of 10 SMEs are unaware of the financial impact it will have on them. Collectively, SMEs could be hit with up to £1.67bn in additional costs.
“It’s not just the higher wage bill that will affect their bottom line but also the associated costs, such as national insurance, pension contributions and overtime pay, as well. SMEs in particular, need to make long-term plans around the National Living Wage increase if they don’t want to drown in crippling fines and unexpected additional costs, which could spell doom for their business. The good news is it is not too late for SMEs to become compliant but only if they take action right away.”
The #NationalLivingWage is a truly wonderful thing.— John Bull (@larrymeath) 1 April 2016
Unless you actually have to live on it, that is.