Businesses cautious before national living wage introduction

The national living wage (NLW) comes into effect on Friday 1 April 2016.

Research by Federation of Small Businesses (FSB) found that over 38% of employers expect the NLW to have a negative impact on their business, whereas only 6% thought the policy would have a positive impact.

With NLW projections expecting to it to rise to around £9.15 by 2020, 54% of employers said the new changes would still have a negative impact on their business.

When asked about adapting to the NLW, 54% said they would restrain from hiring new staff while 50% said they would increase their prices.  

Other measures some employers stated they would take:

  • cut staff hours (41%)
  • reduce staff (31%)
  • cancel or postpone planned investments (26%)
  • freeze or reduce wages of higher paid staff (29%).

Mike Cherry, FSB national chairman, said:

“Our research suggests that over half of small firms already pay their staff more than the voluntary Living Wage, but those that don’t are often operating in highly competitive sectors with very tight margins. 

“While it is easy to say everyone deserves a pay rise, the only way to deliver and sustain higher wages in the long run is to improve productivity, boost skills and drive business growth. Without the right type of productivity growth, there is a real risk that in many sectors higher enforced statutory wages will lead to fewer jobs being created, fewer hours for existing staff and, unfortunately in some cases, job losses.”

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