You may be aware that the minimum wage for many employees is increasing in 2016, and it will have a profound impact on small business running costs. To help you prepare, here’s our quick guide to the new National Living Wage – and how your business can cope with the changes.
What is the National Living Wage, and does it apply to small businesses?
As of 1st April next year, all employers – regardless of the size of your company - will have to offer your workforce a new minimum National Living Wage, set by the government.
At the moment, the standard minimum rate is £6.70 per hour. This will rise to £7.20 for employees aged 25 and over, meaning they will take home at least £970 more a year if they’re in full-time work. The current minimum wage will continue to exist for employees aged 21-24.
Year on year, the National Living Wage will continue to increase, so that workers will be earning at least £9 per hour by 2020 – which amounts to £4,800 across the year.
How will National Living Wage changes impact SMEs specifically?
While it’s good news for employees, there is concern within the small business community that the new requirements will impact company growth.
A third (38%) of SME bosses claim they will be negatively affected by the National Living Wage, according to the Federation of Small Businesses (FSB), with a small retail business that employs 6 full-time staff having to find a further £5,900 a year to cover the wage increase.
In order to cope, more than half of small businesses say they will be forced to raise consumer prices, while 52% admit that it will put them off hiring new staff.
What can small businesses do to cope with higher National Living Wage costs?
The best way to deal with an enforced increase in outgoings is to make your workforce more productive, so that you increase output and grow revenue alongside the higher wage bill.
Sometimes, a small investment in business technology can really boost staff capabilities. For example, how up to date is your card payment terminal? Poor signal and unreliability can result in transactions taking a long time, which impacts customer service.
Switching to a high-speed chip and PIN machine with contactless capabilities enables shoppers to pay for purchases in seconds – which is critical for controlling queue lengths during peak trading periods. Not only that, the improvement in customer satisfaction will enhance their likelihood of a return visit, boosting their value to your business.
Other tips for increasing small business productivity include:
· Track how much time is currently being spent doing tasks. This will help you determine which elements of your employees’ workload is draining resources, so you can focus on exactly where improvements need to be made
· Set staff daily, weekly and monthly goals, with deadlines for achieving them – and reward for the highest performers – to boost morale and encourage healthy competition
· Let your staff take regular short breaks, as this will re-energise them for the next part of the day
· Try not to multi-task, as people work best when they focus on a single job at a time
· Remember you’re not aiming for perfection; you’re looking for progress
For more information about the upcoming changes, see the National Living Wage web page.