What does the Budget Announcement on National Living Wage & National Minimum Wage mean to you?
Fri 01 Dec 2017
Although “only” a rate increase was announced at the Budget, the wider impact and context makes this much more important for employers and businesses to focus on from both a cost and compliance perspective. We explain why below.
The rate increase announcement
in April 2018, the NLW and NMW will increase as set out below:
The increases reflect a pay increase of approximately 4% – 6%.
Context is all
With an increase in NLW/NMW, the Government puts increased cost and compliance pressures on employers, including:
This is likely to impact and narrow the pay differentials between different grades and roles. This may then reduce motivation to progress into more senior roles given that the reward package is less attractive. Can your business support a 5% pay increase for all employees?
Alongside this, HMRC now investigates more businesses in respect of their NMW compliance. This follows a trebling of investment by the Government in this department and given the wider social media pressures compliance is being enforced more strongly in a topic that is complex and technical to get right. Many employers are therefore inadvertently falling foul of NMW legislation. This is evidenced by over 500 employers being named in 2017 for paying less than the published NMW rates. More on the technical aspect of NMW can be read here.
With higher mandatory minimum pay levels, the scrutiny of NMW enforcement is likely to attract even more attention. Therefore, it is recommended that you take proactive steps to address this potential risk.
What can employers do?
Pay and reward is changing significantly. Employers have an opportunity to be brave and review their pay and reward structure at all levels to ensure it is compliant, attractive and rewarding.
We set out below some key steps:
Next steps
It is a time of uncertainty but also a time to take action and be decisive. We can help you make your decisions, remain compliant and review / enhance the pay and reward structures you have in place. Please feel free to contact our team to discuss in more detail
Written by Ian Goodwin – Ian.Goodwin@mazars.co.uk
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