Since Chancellor George Osborne announced the creation of a new national living wage in his 2015 Summer Budget, planning how to deal with the associated cost increases has challenged many organisations.
When the national living wage comes into effect next month, the minimum hourly wage for employees aged over 25 will rise to £7.20, ultimately increasing to £9 by 2020. This an increase on the current minimum wage, which is currently set at £6.70 for employees aged 21 and over.
For some employers, this will not require any action, particularly if they have already committed to pay the Living Wage Foundation’s voluntary living wage, which currently stands at £8.25 an hour and £9.20 in London.
However, for others, the introduction of the national living wage could represent a significant increase in their salary bill, at a time when they may already have had to account for a rise in pension contributions post auto-enrolment. Organisations have mooted a number of possible ways through which to absorb the additional cost of compliance. Among others, these include cutting bonuses or freezing pay for staff unaffected by the change, reducing headcount or seeking further efficiencies within the business.
It is in this latter area that reward and benefits have a role to play. Find out more about how employers can use their pay and benefits strategy to mitigate the impact of the new national living wage on their business in How will the national living wage impact reward strategies?
Later this month, the industry will be watching this year’s Budget unfold with interest. As well as likely changes to pensions tax relief, many will be waiting to see if the government’s review of salary sacrifice arrangements results in it taking action to close these.
Futureproofing a reward and benefits strategy to ensure it is equipped to stand up to the demands of such legislative changes is a priority for most organisations. Employee Benefits Connect, which takes place on 9 March at the Lancaster London, will explore a number of the future trends likely to impact the workforce and benefits strategies in order to help employers prepare for all eventualities.