Louise McAloon, Partner, considers how, with the Autumn Statement from the Chancellor under 4 weeks away, employers keenly await confirmation as to whether the Government will increase the National Living Wage by a further 40p per hour in April 2017 to £7.60 per hour for workers aged 25 and above.
The introduction of the National Living Wage on 1st April 2016 saw workers aged 25 and above receive an inflation busting pay rise of 50 pence per hour from the national minimum wage rate of £6.70 to £7.20 per hour. The national minimum wage rates continue to apply for those under 25.
National Living Wage and National Minimum Wage rates are reviewed annually by the Low Pay Commission with rate changes determined by the government and implemented in April each year. When first announced in the 2015 Budget, the target set to be achieved through incremental increases was £9.00 per hour by 2020 with the intention to provide a pay raise for over 6 million people in the UK.
Whilst the benefits for low paid workers are irrefutable; many employers particularly small organisations and those in the retail and catering sectors which are heavily dependent on low paid workers, are increasingly concerned about the financial impact of the compulsory statutory wage increases on their businesses. This is particularly the case given the uncertain economic forecasts post Brexit and commentators have already questioned whether the 2020 target of £9.00 per hour can realistically be met given the challenges and priorities posed by the Brexit vote.
Where the costs for employers cannot be readily absorbed; many organisations have little choice but to consider cost reduction measures from not filling vacancies, limiting non-essential recruitment, cutting discretionary payroll costs such as non-contractual bonuses and overtime, to reductions in hours and headcount through restructure and redundancy if necessary. At the same time boosting staff productivity and effectively managing staff performance are no longer desirable criteria but rather essential items on the ‘to-do’ list and Human Resources personnel play a pivotal role in ensuring that employers can implement and deliver necessary changes that are compliant with our employment laws and industrial best practice.
Issues such as complying with collective consultation obligations when proposing to amend the terms and conditions of employment for 20 or more staff or identifying when a bonus is likely to be deemed contractual by virtue of custom and practice can present complex and potentially costly problems for organisations in terms of Tribunal litigation, if not handled correctly. Employers contemplating changes should always seek legal advice from an Employment Law Solicitor to ensure that their statutory obligations are being met.