The National Living Wage appears to have been welcomed by many, and disputed by some. For the majority an increase of 50p in their hourly rate will have a real impact on their lives, with many benefiting by around £900 each year. However, the scheme has come under fire with some thinking the rise isn’t enough for struggling households in Britain. Perhaps more worrying in the long term, there’s a concern that employers will cut back on staff, as it was seen in certain states in the US with a real dip in employment as businesses struggled to cover the cost.
Here’s a little more information about the New Living Wage and what it means for the trades industry:

What is the National Living Wage?

From April 1st 2016, the national minimum wage across the UK will increase by 50p from £6.70 to £7.20 per hour. Workers over the age of 25 will benefit from the rise, the first of a number planned over the course of the next four years. The idea of the increase is to reward those that work hard and encourage others back in to work.

How could the National Living Wage affect the trade industry?

1) Increased Labour Costs

As you might expect, the biggest impact is in the increase of overall labour costs. Whatever the size of your team, whether it be electricians or plumbers or engineers, you’ll have to find an additional 50p for every hour each employee works, certainly not a small amount, making an impact on your bottom line.

2) Improved Productivity

Following the announcement, research conducted by the CIPD and Resolution Foundation, revealed how employers felt they would manage the increase, with 30% of employers questioned saying they would find ways to improve productivity. It is also hoped that the increase in salary will make employees more loyal and therefore increase staff retention, feeling they are being rewarded more appropriately.

3) Reduction in New Roles

There’s a real concern that the increase in hourly rate could lead some businesses to simply not replace or hire new staff, leading to a slowing of the job market. Within the trade industry this could mean staff required to work extra hours to cover the lack of an additional member of staff.

4) Increase in Apprenticeships

It is believed that apprenticeships will become increasingly popular as the trades industry struggle to reduce costs following the increase. Apprentices are paid between £3.30 and £3.87 per hour, so it would make a huge cost saving for a business trying to reduce the effect on the bottom line. This is fantastic for young people wanting to join the trade, however there is the potential for a detrimental effect on experienced tradesmen who could find they are overlooked for new roles, or simply too expensive, and replaced by a more affordable apprentice.

5) Increased Customer Costs

The introduction of the National Living Wage will of course have an impact on the price the customer pays. Increased costs will be factored in to the price of work done, and passed on to the customer. Alternatively those in the trades industry may decide to absorb the cost and secure their customer base.

What actions do I need to take as an employer?

It is your responsibility to ensure that you’re paying your employees the National Living Wage. This means you need to change your payroll ready for the implementation of the new wage on April 1st, 2016. You’re also required to inform your staff of the change and their right to the increase.

What happens if I don’t pay the National Living Wage?

HMRC have threatened to take action against those that do not pay their staff the new National Living Wage, including public shaming for larger companies. H&M, the high street clothes retailer, recently came under fire for not paying their staff the minimum wage. Not great publicity for your business!
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