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NLW increase: How to put protections in place

Thursday May 14, 2020

The recent National Living Wage increase will give the working backbone of the UK a much-needed break. It will benefit key workers including the drivers and social carers who have been keeping the nation going. Their value is undisputed.

It is, however, an additional cost for businesses at a time when they are already under significant pressure. The Institute for Fiscal Studies went as far as calling for a delay to prevent struggling businesses from laying off workers or making redundancies on return from furlough leave.

It has never been more important for companies to protect their people, but they also need to protect their own businesses. With government playing an increasing role in setting pay levels, they need to help employers to deliver rewards and benefits that don't bust the budget.

Safeguarding measures

A November 2019 report from the Low Pay Commission suggests that organisations respond to increasing wage bills in several ways. This includes accepting lower profits, increasing prices, making cuts to non-labour costs, restructuring their workforce or pay structures, and increasing output through improved productivity.

It uncovered that between 50 and 70 percent of employers absorbed some, or all, of the cost of the national living wage through lower profits. Many employers reported that this is unsustainable. If profits are repeatedly cut, eventually a business becomes unviable.

Right now, more companies than ever are struggling to balance the books. It is crucial that businesses are savvy with their spend and think economically about workforce investment.

Enhancing the employee offer

At a time of significant unrest, employers need to make sure the workforce feels safe, confident and supported. A fair and regular income is of course critical, but far from straightforward at this time.

There are other ways that businesses can enhance their employee offer. Employee benefits packages are easy to implement and don’t have to incur higher costs. Providing employees with easy to access, cost effective insurance plans helps protect workers against the unexpected. It also helps employers to maintain a happy and healthy work environment.

Discounts offer substantial long-term savings on everyday purchases and add value beyond the workplace, helping employees to save money and get more out of their pay cheque.

It’s not always easy for responsible businesses to meet increasing staff costs while also maintaining profitability. Smart companies understand that a carefully considered mix of monetary and non-monetary returns – such as discounts, lifestyle benefits and access to valued insurances – sets the balance right. In so doing, businesses can ensure that workers are paid their due, are properly rewarded and feel valued, while ensuring ongoing economic viability.

Government can help employers better look after their people

The government has a number of protective policies in place to save jobs immediately. But whilst employers are under increasing pressure to look after their staff’s physical, mental, social and financial wellbeing, they should not be financially punished for providing these benefits.

The government should consider reducing insurance premium tax, as it is a regressive tax that hits the poorest households hardest. 

While it is understandable that the government’s focus is on the immediate financial needs of people and businesses affected by the coronavirus it is important that the Autumn Budget focuses on more measures to make sure people have enough cash to last a lifetime.

Article published in HR Zone on the 14th May 2020.

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