Chancellor’s plans likely to hit employers heavily in the pocket, says law firm

Chancellor Sajid Javid has pledged to raise the National Living Wage to £10.50 within the next five years, but the effect on employers will be grave

Kate Palmer, associate director of advisory at global employment law consultancy Peninsula discussed what this means for employers and employees:

“Although the increase is to be phased in over the next five years, the chancellor’s plans are likely to hit employers heavily in the pocket. In reality, the amount of the increase is not particularly big news; the minimum rates are reviewed and generally increase each year and employers have come to expect this.

“Perhaps the biggest news to take from the announcement is that the National Living Wage, the highest band of minimum wage available, will be extended to include anyone who is aged 21 and over. This will effectively revert the minimum wage structure to how it was before the introduction of the National Living Wage by re-applying the highest minimum wage to those aged 21 and over.

“While fewer age bands will make the system a little easier for employers to understand, it means a significant increase in hourly pay for some workers which some small businesses may struggle to achieve. Fortunately, the advance announcement of the pay increase will mean that some forward planning is possible, and budgets can be set accordingly.

“Despite this, the overall effect will not change; employee wages will get higher. This will be the case under either a Conservative or a Labour government. Although structured differently, Labour leader Jeremy Corbyn has also confirmed that a pay increase for the country’s lower paid workers is one of his highest priorities.”

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