Industry experts look at the impact of the National Living Wage on smaller businesses

minimum wage

“Auto enrolment, battles with late payment, dividend tax changes and now the National Living Wage: Britain’s small businesses are under pressure. So far this year our helpline has had calls about redundancies hitting peaks last seen at the worst point of the recession. SMEs are seeing these rises in costs and trying to work out how to cut them. Will staff benefits be affected? Sadly, I think they might be. In theory you always look after the staff you have – at the FPB we’ve recently upped our own benefits spend to do just that. But while it would be short-sighted to cut benefits, it’s a tough market out there and hard to pass costs on to suppliers or consumers. It may be that SMEs are pushed into cutting them.” Ian Cass, managing director, Forum of Private Business

“When the new National Living wage for the over-25s was announced we surveyed our members to find out just how it would affect their business. Well over a third (38%) expect the £7.20 per hour to negatively affect their business when it comes into force in April. Worse still, when asked to consider the impact of the wage rise being at least £9 an hour by 2020, over half (54%) viewed it negatively. Although benefits spend was not specifically mentioned, just over half (52%) said they would be forced to put off hiring new staff, while 50% said they would raise their prices. Other steps SMEs say they’ll be forced to take include cutting staff hours (41%), reducing staff numbers (31%) and cancelling or postponing planned investments (29%).” Mike Cherry, policy director, Federation of Small Businesses

“There’s no doubt 2016 will be a challenging year. The introduction of the National Living Wage plus mandatory reporting on gender pay gaps means employers will have to allocate budget to meet legislative requirements. SME employers will need to look across the spectrum to see where reallocations can best occur. Interestingly, Aon Hewitt’s 2014 Salary Increase Survey revealed 60% of organisations provide merit increases to every level of employee performance. Businesses could do worse than focus on those who contribute most to the business. Overall though, a holistic view is needed. Better this than a knee-jerk reaction to cutting benefits, which is more likely to have a greater negative impact on staff motivation.” Ruth Thomas, senior consultant, Curo Compensation