Nearly 3 million low-paid workers will receive a pay increase of almost 10% next spring after the chancellor recently announced an increase in the national living wage to £11.44 an hour.
The increase from £10.42 to £11.44 comes against a backdrop of a cost-of-living crisis in which inflation peaked at 11.1% – the highest in 40 years.
Eligibility for the national living wage (NLW) will also be extended by reducing the age threshold from 23 to 21.
National minimum wage rates for younger workers will also increase, with those aged between 18 and 20 getting a wage boost to £8.60 an hour – a £1.11 hourly pay rise.
The news has naturally caused considerable concern amongst many owner managed, small and medium-sized businesses who are now worrying about how they will cope with this additional burden.
So, what are the options?
– Business owners accepting that they may need to absorb the increased overheads and therefore agree to take out lower profit levels.
– Consideration of a price increase, in order cover the increase.
– Exploring ways in which to increase and improve productivity in-house.
Employers who are heavily resource driven, i.e. those within the hospitality, entertainment, healthcare, manufacturing, and the transport sectors are the most likely to put up prices.
When it comes to boosting productivity the most common ways this can be achieved is as follows:
– Improving general business practices (such as quality control, supply‐chain management…etc).
– Raising staff morale and motivation.
– Requiring and tasking employees to take on more tasks.
Whatever way you choose to proceed what is vital is that consideration and forward planning as to how this will affect your own business, and how you will absorb this increase is key.
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