National living wage | Salary hike to put pressure on employers

Salary hike to put pressure on employers

The national living wage is set to increase by 6.2% this New Year in a move the government has branded as the ‘biggest cash increase ever’.

According to the BBC, the rise is more than four times the rate of inflation and will see hourly pay for people over 25 rise to £8.72 from April 2020.

Despite the increase, businesses warned that the sharp spike in wages could put increased pressure on companies and urged the government to reduce costs elsewhere for businesses.

This is supported by Hannah Essex, Co-Executive Director of the British Chambers of Commerce, who claimed that many companies ‘have struggled with increased costs in a time of great economic uncertainty’.

She added: “Raising wage floors so far above the rate of inflation will pile further pressure on cash flow and eat into training and investment budgets.

“For this policy to be sustainable, the government must offset these costs by reducing others.”

Elsewhere, the Federation of Small Businesses (FSB) shared its concerns stating that ‘an increase of this magnitude’ would mean that smaller businesses may recruit fewer people, cancel investment plans and even consider redundancies.

“There's always a danger of being self-defeating in this space,” said Craig Beaumont, Director of External Affairs and Advocacy at the FSB.

In addition, he revealed that small companies will need extra support due to the planned 1.7% increase in business rates in April this year.

Beaumont added: "Wage increases aren't much good to workers if prices rise, jobs are lost and there's no impact on productivity because employers are forced to cut back on investing in tech, training and equipment."

 



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