Can you pay the Living Wage and still live?

Next April (2016) the National Minimum Wage(NMW) for those age 25 and above will become the National Living Wage (NLW): £7.20 per hour – that is a rise of 7.5%. At a time when prices are pretty static, that is going to be a massive increase in any people-intensive business. Even if you do not currently employ anyone on the NMW, you may be caught by the NLW because other employees will look to the 7.5% pay rise and wonder if they should have one too. For some solutions read more…

So how will you pay for it and still have an income to live yourself?

  • Seek younger employees. Youth unemployment nationally is still above 15%, so there can be no shame in recruiting young people. There may be additional training costs, but these can be an investment for the future.
  • Improve productivity. Productivity growth in the UK is at about zero whereas in France (that leisured nation) it is above 30%. Employee engagement, well-being and teamwork are all great drivers of productivity. They produce increases well above 7.5%.
  • Review your business processes Are you doing activities that you don’t need?
  • Maximise your use of technology There are many ways in which technology can reduce workloads – have you explored all that might be relevant?
  •  Reduce hours or headcount To get the benefit of doing the same work with less you will need to reduce the hours or your headcount. Redundancies are expensive and damaging to your “employer brand”. So they should be seen as a last resort.
  • Reduce employee turnover. Replacing an employee costs about 150% of their annual earnings. Sound selection processes, a good induction programme and the productivity drivers specified above, all reduce turnover. Spend less time hiring and more time thriving.
  • Improve skills. Which, of course, improves productivity and growth! Now that eLearning has come of age it offers economical opportunities to increase knowledge and to improve almost any skill. Local colleges are invariably keen to help and specialist providers, such as Employer Solutions, can assist in particular areas.
  • Get the stress levels down. Your stress levels, as well as those of your employees. Stressed managers tend to bully employees and even if employees do not become dysfunctional they suffer from stress This increases errors, creates absence and fuels turnover – not to mention the risks of constructive dismissal claims. Stress management, CBT and mindfulness courses are becoming mainstream for managers who are serious about their stress levels. Sport and exercise also reduce stress so you could find ways to encourage this, through the cycle to work scheme, for example.
  • Use flexible working. This can include the use of (unfairly maligned) zero hours contracts but also providing working hours and rotas that improve work-life balance, reduce stress and increase productivity.


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