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Assessment of the National Minimum Wage and National Living Wage for Wales’ Businesses

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The article was submitted by Bowden Jones Solicitors

Natalie Williams, Human Resources Executive at Bowden Jones Solicitors, assesses how the rise of the National Minimum Wage and National Living Wage will affect businesses in Wales.  Natalie takes us through the changes and discuss the impact on small businesses in particular.

What Changes Have Been Made?

The National Minimum Wage is the minimum pay that all workers regardless of age are entitled to. The National Living Wage only applies to workers aged over 25 years of age and is higher than the National Minimum Wage. It doesn’t matter what size of company you run, or how many people you employ, you are always required to pay the correct minimum wage.

Both the NLW and NMW increased as of 1 April 2017, please see the changes below.

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice
2017 £7.50 £7.05 £5.60 £4.05 £3.50
2016 £7.20 £6.95 £5.55 £4.00 £3.40
2015 £6.70 £6.70 £5.30 £3.87 £3.30
2014 £6.50 £6.50 £5.13 £3.79 £2.73
2013 £6.31 £6.31 £5.03 £3.72 £2.68
2012 £6.19 £6.19 £4.98 £3.68 £2.65
2011 £6.08 £6.08 £4.98 £3.68 £2.60
2010 £5.93 £5.93 £4.92 £3.64 £2.50

Source: www.minimum-wage.co.uk

How has the NLW impacted businesses in Wales?

Research has shown that by 2020 the introduction of the National Living Wage will cost companies over £3 billion per year in extra pay, national insurance and pensions. So how will these costs be passed on? Below is an estimate on how businesses will deal with the extra staff expenditure.

  • Price risesRetailers will try to pass this on to consumers in the form of higher prices.
  • Staff reductionsMany retailers will shed labour by cutting staff hours and reducing staff numbers mostly by not replacing employees when they leave.
  • Closure of propertiesSome companies may have to close some of their locations to remain competitive
  • Growth in Self-employed Contractors – self-employed contractors will avoid the NLW regulations.
  • Cheaper terms with suppliers – A knock on effect to suppliers who may have to lower their prices.
  • New technologyCustomers can expect more technology such as self-service to replace workers.
  • Workers under 25 are favoured – Employers target younger workers during recruitment to avoid the higher costs.

So while employees may be pleased with an increase in their pay, the long term consequences could be detrimental to companies, employees and consumers alike.

Small business should be wary and think carefully of how the changes will affect them before introducing any of these measures.

For any HR advice please contact Natalie Williams on 02920 484550 or click here.