Rising national living wage hits SME profits
64% of small businesses are seeing profits fall as a result of the national living wage (NLW) rise, according to research.
The NLW increased from £7.20 to £7.50 per hour on 1 April 2017.
Out of 835 businesses surveyed by the Federation of Small Business (FSB), 39% have put up prices to cope with the NLW increase.
Almost one in four (24%) firms either cancelled or downscaled investments, while 22% reduced working hours and 19% hired fewer employees.
43% of businesses increased wages in line with the NLW, suggesting the majority of owners are already paying their workers above the new rate.
Dealing with the wage rise
Less stressful, but far from straightforward, ways to manage the costs of the NLW include:
- increasing productivity
- streamlining your processes
- passing on additional costs on to your customers.
If you fail to pay staff the NLW, you will face a fine based on the underpayments.
The penalty for firms who do not comply with the NLW is 200%, although this will be halved if employers pay within 14 days. The overall maximum penalty is £20,000 for every underpaid worker.
For further information on the national living wage, please contact Andrew Kershaw on 023 8046 1201.