National Living Wage: what does it mean for small businesses?
Most people will have heard about National Living Wage (NLW), and the changes that are due to come into force 1st April 2016.
For those that are unaware, the NLW was originally a rate employers could voluntarily follow. It’s based on the basic cost of living. However, George Osborne announced in the 2015 summer budget that from April 2016 NLW will be compulsory for workers aged 25+. It will start at £7.20 and by 2020 this will rise to £9. This will replace their National Minimum Wage (NMW).
For employers, depending on your workforce, this will mean having to make some changes to meet the government’s new guidelines.
Understandably, the new policy has some SME owners worried about how it will impact their business. To help, we’ve put together a few points to consider when re-evaluating your business strategies.
April might seem way off, but deciding on what plans you want to put into place as early as possible will cause the least disruption, and keep your business running smoothly.
Take a look at how the changes affect the staff you currently have on your books, and how much more you will pay as a result of this. This will give you an idea of how your business will be able to manage this, and you can start planning to make savings in other places.
Have the right people on board
It’s not an option that the majority of business owners want to have to think about, but reducing your staff numbers may be a choice you have to consider. If this is a possibility, you need to make sure you follow the proper redundancy procedures.
But before you leap into any major decisions, you need to take a proper look at how this move could impact your business. Will it stall productivity? Will you lose out in the long run?
Review your pricing
Revising the prices you currently charge for your product/service may be the most appropriate option for you. But you’ll need to find a way to do this without causing a decline in sales.
Yes, raising your prices isn’t ideal; however many other businesses are in the same boat, including your competitors, so don’t worry about whether you can still compete in the market.
If you’d like more information on the National Living Wage, read our guide.
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