How has the National Living Wage impacted your business?

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We’re almost a fortnight into the introduction of the National Living Wage (NLW) introduced on  1 April this year, which has seen the minimum rate of pay increase to £7.20. From a business perspective, the Regulatory Policy Committee estimates the rise will cost companies £804.4 million in extra wages and staff costs.

As a small business, The Organised Cleaning Company will feel a significant impact on wage costs and profit margins due to the introduction of the NLW. As a result, we have pulled together research  results conducted on other small & medium sized businesses to find out what their views are on what impact the NLW will have on their business:

  • Findings from the Close Brothers Business Barometer suggest that 50% of business owners believe that this increase will not will bring about a measurable increase in worker productivity;
  • When asked how they plan to offset the increase in staff costs, almost one in five (18%) were still unsure. The majority (51%) claimed they will do so by reducing costs in other areas;
  • Research by the Federation of Small Businesses (FSB) says that many are planning to slow job creation, raise prices or postpone or cancel planned investments to compensate for the higher statutory rate;
  • Well over a third (38%) of small employers expect the new NLW to negatively affect their businesses now that it has come into force.
  • Businesses asked to consider the projected rise in the NLW to at lest £9 per hour by 2020, over half (54%) responded that it would have a negative impact. Just 6% of businesses think the policy would have a positive effect on their business.
  • When asked how businesses would adapt to the new NLW, just over half (52%) say they would put off hiring new staff while 50% say they would raise their prices.
  • Other steps businesses plan to take to manage the higher wage level include: cutting staff hours (41%), reducing staff numbers (31%), cancelling or postponing planned investments (29%) and eroding pay differentials by freezing or cutting the wages of higher-paid staff (26%). Almost a third of businesses owners expected to absorb the cost through reduced profits (29%).

Only time will tell what the overall impact of the of the NLW will have on business, in particular small & medium sized businesses. The general consensus at this stage, however, is that businesses will have to take a close look at their bottom line and come up with creative ways to incorporate those added cost, apart from increasing prices!

At The Organised Cleaning Company, we are look at all possible options available to make sure that we mitigate the increased costs and ensure that our staff are paid what they are legally entitled to!

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