We’re sure you’ve heard this from a dozen or more sources already but we could hardly let the budget go by without commenting on the employment implications.
We applaud the government for their worthy intentions to increase the National Minimum Wage (with a name change to National Living Wage) to £7.20 an hour for employees aged over 25 in April 2016, but we’re hesitant to believe that this increased cost will be nicely balanced for employers by Corporation Tax reductions.
For many employers of course, this will have little or no impact as staff are paid at a rate higher than this already. But for those employers paying on or around the NMW rates, this could mean a significant hike in wage bill, at around the same time as having to introduce the pension required by auto-enrolment.
Also employers will need to exercise diligence if they offer salary sacrifice schemes (childcare vouchers for example) as these must not take the hourly rate below the new NMW (NLW) rates.
There is of course concern about the viability of such wage increases in typically low paid sectors such as retail, hairdressing, childcare and social care. Economists may be predicting that prices will increase in the shops as a result, but it won’t be such a simple matter in social care for example where care fees are set by social services or heath care commissioners. Who will really pay for these additional costs?
To end on a positive note – there is some good news for employers though as the National Insurance Employment Allowance increases to £3,000 a year.