The Federation of Small Businesses (FSB) has called on the government to consider whether forthcoming rises in the National Living Wage (NLW) rate may need to be delayed if the economy cannot bear the pace of change.
By 2020, the NLW will have risen to £8.75 per hour. The business group has suggested that any risk to the UK economy should be ‘built into the next NLW increase’, which is currently scheduled for April 2018.
The NLW should not rise any higher than £7.85 next year, the FSB has suggested.
The call to delay further increases comes following the FSB’s publication of new research, which revealed that 64% of small firms affected by the NLW have taken lower profits in order to meet the latest rate rise.
43% of small businesses have had to increase their wages to meet the demands of the NLW, the research also suggested.
Mike Cherry, National Chairman of the FSB, said: ‘Small employers have demonstrated their resilience in meeting the challenges set by the NLW, with many cutting their margins or even paying themselves less to pay their staff more.
‘In sectors where margins are tight, small firms are resorting to more drastic measures to cope with the NLW.
‘It’s vital that the NLW is set at a level that the economy can afford, without job losses or harming job creation. Cost pressures on small businesses are building, and with most recent economic indicators underperforming, we are now facing the reality that the NLW target may need to be delayed beyond 2020.’
The British Chambers of Commerce (BCC) has called for a rise in the National Living Wage (NLW) to help balance inflationary pressures for low paid workers.
Responding to a call made by the Low Pay Commission (LPC) for comments in regards to minimum wage levels, the BCC recommended a 2.7% increase in the NLW rate, to ‘compensate for the rise in inflation’.
The Consumer Prices Index (CPI) rate of inflation currently stands at 2.9% – its highest level in almost four years.
However, the BCC also stated that many businesses are ‘struggling to absorb the rising cost of employment’, citing pressures from existing policies, such as the Apprenticeship Levy and pensions auto-enrolment. The business group said that any amendment to the NLW rate should be ‘cautious’, in order to prevent further wage bill increases.
Jane Gratton, Head of Business Environment and Skills Policy at the BCC, said: ‘The BCC has recommended an increase in the NLW to help low paid workers manage inflationary pressures which are eroding their spending power.
‘Setting the NLW must be done cautiously, comprehensively taking into account economic circumstances so that people are not priced out of jobs.’
Household incomes in the UK are falling at their fastest rate since 2011, data published by the Office for National Statistics (ONS) has suggested.
Real household disposable income per head fell by 2.0% in the first quarter of 2017 when compared to the same quarter in 2016. This represents the fastest decrease since 2011.
The main reason for the decline was the rise in inflation, the ONS said.
Meanwhile, a separate report published by the Joseph Rowntree Foundation revealed that working families are facing ‘bigger shortfalls in their household budgets’ despite tax cuts and an increase in the National Living Wage (NLW).
The Foundation suggests that this is due to rising living costs, and wage increases being reduced.
Campbell Robb, Chief Executive of the Joseph Rowntree Foundation, commented: ‘Working families are facing bigger holes in their budgets worth hundreds of pounds, despite a higher NLW and tax cuts.
‘It means millions of families are facing a struggle to make ends meet as the cost of getting by in modern Britain rises ever higher.
‘With the Bank of England forecasting inflation will increase even higher this year, families are facing no respite. We need the government to take action and ensure living standards do not fall backwards.’
New National Minimum Wage (NMW) and National Living Wage (NLW) rates are set to come into effect from 1 April.
The NLW, which applies to those aged 25 and over, is set to rise from its current rate of £7.20 to £7.50 an hour, whilst the NMW rate for individuals aged between 21 and 24 will increase to £7.05 from its current rate of £6.95.
Workers aged 18 to 20 will see their hourly rate rise to £5.60 from £5.55, and the rate for those aged under 18 will rise by 5p to £4.05 from £4.00.
Apprentices stand to benefit from a 10p increase from £3.40 to £3.50 per hour.
Commenting on the wage rises, Bryan Sanderson, Chair of the Low Pay Commission (LPC), said: ‘The minimum wage increases on 1 April will bring another year of substantial pay rises for the lowest paid. The minimum wage will cover more workers than ever, and ripple effects mean that the benefits could affect people earning above the minimum as well.’
However, Mr Sanderson acknowledged that businesses may experience added pressure. He stated: ‘Accompanying pay increases, there will inevitably be pressure for employers. These are turbulent times and we will continue to monitor the situation closely.’
From April, the government will align the NMW cycle with that of the NLW. This means that any future NMW increases will occur in April of each year, instead of October.
Average wages for self-employed individuals are lower than they were in 1994/95, a report by the Resolution Foundation has revealed.
Data published by the think tank showed that, whilst the number of self-employed workers has grown by 45% since 2001/02, their weekly earnings have fallen by £60.
The report revealed that self-employed individuals’ typical weekly earnings grew during the late 1990s and early 2000s, but fell in the wake of the financial crisis.
Earnings have recovered over the last year, and, according to the Resolution Foundation, are ‘almost back to levels last seen in the late 1990s at around £240 a week’.
However, this is 15% down when compared to typical weekly earnings in 1994/95.
Adam Corlett, Economic Analyst at the Resolution Foundation, commented: ‘Almost five million workers across Britain are now self-employed. But while the self-employed workforce is getting bigger, typical earnings are actually lower than they were 20 years ago.
‘With so many self-employed workers earning so little, it is right that the Government investigate how public policy should catch up to meet the needs of these workers.’
A Government spokesperson stated: ‘The Government is committed to building an economy that works for everyone and while the National Living Wage has given one million workers a pay rise, the Prime Minister has made clear the labour market must support and protect all workers.’
A new report published by the Public Accounts Committee (PAC) suggests that the Government has made ‘limited progress’ in reducing the cost of regulation for UK businesses.
The Government had previously pledged to reduce the total cost of red tape by £10 billion between 2015 and 2020.
In its report, the PAC reveals that, so far, less than £1 billion has been saved. It also suggests that the Government has included the compulsory 5p plastic bag charge as a ‘saving’ for retailers due to the additional revenue it generates.
Other significant costs, however, have been excluded from the target, such as the ones generated by the National Living Wage (NLW).
The PAC urges the Government to ‘consider whether it is appropriate to include regulations imposed on business as contributing towards the target’.
Meg Hillier MP, Chair of the PAC, stated: ‘A policy of reducing regulatory costs has the potential to deliver significant benefits but the Government has its work cut out if these are to be realised.’
Meanwhile, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), commented: ‘FSB members tell us regulation is the number one issue they want this Government to focus on. As we face the challenges and opportunities of Brexit, it is vital that we bolster business productivity and remove burdensome red tape.’
The Federation of Small Businesses (FSB) has called on the Government to provide more support to small businesses to help them cope with the latest increase in the National Minimum Wage (NMW) rates, which came into effect on 1 October.
The business group has called for the Government to consider extending the Employment Allowance to help small businesses under pressure from rising wage costs.
The FSB’s recent quarterly Small Business Index report showed that confidence amongst small firms is in negative territory for the first time in four years, while labour costs were the largest cited rising cost for small businesses, with 42% reporting it as a concern.
Mike Cherry, National Chairman of the FSB, said: ‘Small businesses are reacting to difficult economic conditions with characteristic resilience, but they will need more help if increases to the minimum wage are to be a success and not affect employment levels or investment decisions.
‘We call on ministers to consider a significant uprating of the Employment Allowance from its current £3,000 level. This has already helped to boost pay levels and incentivise job creation, and could be the lifeline many smaller firms need due to fast-rising labour costs.’
As from 1 October, the NMW increased from £6.70 to £6.95 an hour for 21 to 24-year-olds, and from £5.30 to £5.55 for 18 to 20-year-olds. For 16 to 17-year-olds, the NMW rose from £3.87 to £4.00 an hour, and the NMW rate for apprentices increased from £3.30 to £3.40 per hour.
For those aged 25 and over, the National Living Wage (NLW) of £7.20 now applies.