What does the increase in National Living Wage mean for employers?

23 November 2016

Whilst the Chancellor's announcement is positive news for working families, the additional strain on 'EJams' - employers just about managing - should not be underestimated. This comes at the same time as employers are facing a triple whammy of additional costs from the apprenticeship levy, holiday pay changes and pension auto-enrolment increases.

The National Living Wage added 1% to the average pay bill for employees when it was introduced in April. The latest increase will be felt by more employers and at a greater cost, as more employees are now at the National Living Wage level. The actual cost will vary across industries, with retailers, facilities management, care homes and the hospitality industry especially impacted.

The smaller than expected increase raises questions about how we will reach the £9 per hour target by 2020. From moving to £7.50 per hour in April, it will then require an average 50p per year increase in the National Living wage - which could be a tall order for smaller employers.

This is likely to remain a hot focus area for HMRC and employers will need robust processes to ensure they do not unintentionally fall foul of the regulations.

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