Is it scandalous to work round the National Living Wage?

Norman Pickvance, former HR Director for Morrisons, clearly thinks so, he says: “the fact that, in this day and age, some employers are using the introduction of the NLW, which was really designed to help raise living standards in the UK, as an opportunity to cut other benefits so that their overall cost base doesn’t increase is really scandalous”.

Yet the NLW, and the NMW before it, are both government manipulations of the labour market with potential consequences. Love them or hate them, zero hours contracts have grown massively since the introduction of the NMW. The loss of small independent retailers from the High Street may be partly attributed to higher wage costs. At the same time the voluntary sector has expanded into schools and charities. The National Trust could not operate as it does without its army of volunteers.

And, for a small business with, say, 50 part-time employees a 7.5% rise represents £25K p.a. off the owner’s income.

It is unsurprising therefore that smaller employers will seek higher productivity from a lesser number of employees. That does not justify a redundancy programme (since the actual amount of work remains unchanged) but reduced recruitment is legitimate. An employer may be able to argue that reduced hours (or even numbers of employees) is legitimate too, on account of the business need.

Discrimination on the grounds of age is unlawful but, faced with a choice of two equally capable individuals one older than 25 and younger below, the temptation is obvious. But such employers need to be sure that they can demonstrate a legitimate reason (i.e. other than wage or age) for favouring the younger choice.

Dismissing employees who are over 25, but with less than two years service, would seem to be unethical and certainly contrary to the intent of the NLW. But if the viability of the organisation is at stake, understandable.

All this said, the increase is not out of line with the levels of increase that may be achievable through improved engagement and well being programmes. In some circumstances, a committed workforce might offset increased wage rates simply through applying their knowledge and experience to reducing waste.

So, while sympathetic to employers who find their cost base being threatened, there are still positive options that can be taken without losing employees; some of which are described in an earlier blog.

However, employers actions, in seeking to maintain the viability of their businesses, should not be described as scandalous. It might be more fairly described as them seeking to live within their means.

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