Last Updated on: 21st November 2023, 08:14 pm
Small business owners and those working in HR will be all too familiar with the national living wage. It returned to news headlines this week following a speech made by Jeremy Hunt, Chancellor of the Exchequer, during a Conservative Party conference.
Ahead of this year’s Autumn Statement, which is set for late November, Mr Hunt announced that the national living wage is set to increase to at least £11 an hour. This will be part of the 2024 Budget and will be implemented next April for the new tax year.
The national living wage is reviewed annually, so you are likely well-versed with making this amendment to your employee salaries. However, it is not only the financial legalities that should be considered when preparing your business for the national living wage increase. This move also means additional admin time and could potentially impact upon staff satisfaction and morale.
Understanding the national living wage
The national living wage is the minimum hourly rate for employees aged over 23 working in the UK. This works along the same lines as the national minimum wage which is tiered into three age categories for workers aged 16 – 23. These figures are set by the government, and it is a legal requirement for UK businesses to meet them – no matter the size of the company.
The national living wage is calculated in correlation to the current cost of living, although since 2001 the Citizens UK initiative Living Wage has contested this. Each year, Living Wage releases the ‘real living wage’ which is based on a basket of household goods and services and is almost always higher.
Assessing the impact of the increase
The main and most obvious impact of the increase from an employer’s standpoint is higher labour costs. More money going towards salaries means additional outgoings which might affect profitability.
However, if you are able, it could be worthwhile going further than the obligated increase and following the real living wage guideline instead. It is likely that this more accurately reflects the cost of living, and this gesture will earn you respect and increase trust with your employees.
Staff who feel well-cared for will have better morale, potentially increasing your earnings in the long-run. It will also induce employees to stay with the company for longer periods of time, and less staff turnover means cost savings on advertising and training.
Processing the change on Payroll
It is important to be ahead of the game and ready to go when the change kicks in next April. Paying staff the correct amount in a consistent manner is one of the most important HR tasks.
Rather than manually vetting each individual payslip, you could look into installing digital payroll software that uses automation and smart data. This will enable you to make the change company-wide in a matter of minutes and will help to ensure accuracy as it avoids natural human error.
Furthermore, having an automated system will make it easier for you to stay on top of payroll legislation and maintain compliance. This is essential, otherwise you could incur a fine from HMRC or even face legal action from an underpaid employee.