National Living Wage raising questions for employers

minimum wage

With less than three months to go before it arrives, new research finds more than 70% of retailers do not know what their approach will be for implementing the National Living Wage (NLW).

Research from Willis Towers Watson finds 43% of retailers said more than half of their workforce is currently paid less than what the NLW will be.

Yet despite this, 85% say they plan to wait until the legal deadline of 1 April before making any changes to the pay of their employees over the age of 25.

The news comes hot on the heels of separate research from the manufacturing sector – a significant employer of minimum wage staff – which warns that the sharp rise in their costs imposed by the NLW risks “threatening the UK’s growth”.

Manufacturers’ industry body, EEF, finds 36% of members say the increased pressure on their bottom line will impact their ability to grow, with the majority (two thirds vs. one third), seeing problems associated with it rather than opportunities.

It also finds a significant 19% of manufacturers said a 'workforce restructure' would be their main response to the introduction of the new National Living Wage.

Commenting on retailers’ lack of preparedness, Tom Hellier, UK Practice Lead, Rewards at Willis Towers Watson said: “While there are a large number of retailers that will need to review their pay scales to comply with the letter of the law, it is important that the spirit of the law is kept in mind too.”

He added: “Companies that do the very minimum may lose out to their competitors who are seen to provide higher salary levels for their employees.”

One better finding was the fact SMEs were more likely to offer NLW to all of their employees, regardless of age, than larger ones. Only 8% of mid-sized retailers (those employing 10,000 to 49,000 employees) said they definitely plan to do so.

From 1 April 2016, employers must pay full-time employees aged 25 and over an hourly wage of £7.20 per hour, a rise of 50p per hour from the current £6.70 rate.