A Quarter Of Businesses Put A Hold On Any Promotions In Order To Afford National Living Wage

The national living wage currently stands at £7.20 an hour for employees aged 25 and over, and £6.70 an hour for 21 to 24 year olds

A Quarter Of Businesses Put A Hold On Any Promotions In Order To Afford National Living Wage

A quarter of UK small businesses have put a hold on any employee promotions or pay rises because they can’t afford the national living wage – according to a report by XpertHR.

The survey of 212 businesses and 541,340 employees has revealed that 30% of firms had to increase pay for at last some workers in April 2016 – when the minimum wage officially rose from £6.70 to £7.20.

At the time of its introduction, workers eligible for the national living wage (who were previously on the national minimum wage for workers aged 21 and over) would have seen their pay increase from £6.70 to £7.20 an hour, an increase of approximately 7.5%.

It’s suggested that many businesses failed to plan adequately, or even expect, the rise – and it now appears business owners are taking their financial frustrations out on their workers’ pay packets.

59% of small firms admitted that such pay differentials had been squeezed, though 33% did maintain their differentials.

Indeed, a majority of employers (54%) extended the national living wage to all employees – regardless of age – with just 23% limiting it to employees aged 25 and over.

Sheila Attwood, managing editor of pay and HR practice at XpertHR, said:

“It’s clear some employers are underestimating the impact the national living wage will have on their pay budgets over the next three years. They need to be doing much more work including forecasting and modelling the effect of this on their paybill and profitability, and look at ways the business can cope with the increase.

“However, just planning the funding to cover increases in the national living wage is unlikely to be the end of the story. Seeing how differentials will be affected is something all organisations will also need to take into account.”

Click here for a guide on the national minimum wage.

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