Member Article

It’s no joke - Minimum wage increase on 1 April

Chesterfield-based Mitchells Chartered Accountants and Business Advisers is warning that the National Living Wage rise for employees aged over 25 comes into effect on 1 April 2016. The 50p an hour increase could represent a wage bill increase of up to 7.5% for some employers.

From Friday 1 April, employees over 25 and being paid the minimum wage will receive £7.20 an hour. Employers who fail to pay the statutory level could see themselves hit with fines of up to £20,000.

Andrew McDaid, partner at Mitchells Chartered Accountants and Business Advisers, said: “Employers in service industries will really be hit in the pocket with the wage increase. We have a number of service industry clients and many of their staff are in receipt of the minimum wage. This increase could make tens of thousands of pounds difference to their wage bill every year. These costs have got to be passed on somewhere, so ultimately it is the consumer that will suffer.”

The increase is part of the government’s mission to move away from a ‘nanny state’ characterised by low wages, high taxes and welfare to a more prosperous higher wage, lower tax and lower welfare society. The new National Living Wage aims to reduce the reliance on the state topping up wages through the benefits system.

The Low Pay Commission estimates that there are 1,386,000 minimum wage jobs. Nearly half (46%) of all low-wage workers are employed in two sectors: wholesale and retail, and hotels and restaurants. About three-quarters of a million minimum-wage jobs are accounted for by hospitality, retail and cleaning.

Employers may feel the pinch towards payday, however, the good news for businesses is that a recent government survey found that 59% of respondents said they will feel more motivated at work as a result of the increase in their pay packets.

The National Living Wage increase was announced by the Chancellor as part of the Summer Budget in 2015. It will be the largest annual increase in a minimum wage rate across any G7country since 2009, both in cash and real terms.

The current National Minimum Wage rate of £3.30 - £6.70 will continue to apply for those aged 16 to 24, with the premium added for those aged 25 and over on 1 April 2016. This important change will affect over one million workers in the UK aged 25 and over, many seeing their pay packets rise by up to £900 a year.

For advice and help on understanding what the National Living Wage will mean to your business, contact Mitchells’ expert team on 01246 274 121.

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This was posted in Bdaily's Members' News section by Anna Melton .