Welcome to the April 2016 edition of PSD Board Practice InFocus. This edition looks at the introduction of the National Living Wage and the effects that it may have on business.


 

We are about to see the biggest government intervention in wage setting since the Blair government brought in the £3.60 an hour minimum wage in 1999. The National Living Wage (NLW) has doubled from the original amount to £7.20 for the over 25 year olds.

What is the true cost to business of the NLW increase? Who will be affected?

Clearly sectors such as care homes, home care and cleaning, retail, catering and hospitality will feel the affect. However, other sectors will be less exposed. Some businesses have already taken steps to protect themselves from the increased living wage, for example by reducing over time rates. Other organisations have positively welcomed the NLW, in some cases even extending the benefits to the under 25s.

Will this cost jobs? Will it increase prices? Will it reduce profits?

There seems to be a general lack of consensus on the real affect this will have on business. In the past the effects of minimum wages have been over estimated and there are a considerable number of economists who do not expect the NLW to have a significant effect on wages and prices across the economy as a whole.

As part of this ongoing debate, PSD's Board Practice offers two personal perspectives on the effect of the National Living Wage. Firstly Sharon White CEO, at Stephenson Harwood LLP shares her views of the new NLW and secondly Flemming Hansen of PSD's Board practice considers the effects of the NLW on the hospitality and leisure sector.

I very much hope that you enjoy this edition, and look forward to hearing your views and comments.

Lesley Reynolds
MD - Board Practice

Articles

Why the Living Wage works for business too

Why the Living Wage works for business too

You are likely aware of the general idea - if not the detail - of the Living Wage. Under the scheme, employers agree to pay an hourly rate which reflects the cost of living in the UK, rather...

True cost of the National Living Wage

True cost of the National Living Wage

The middle brands in the Hospitality and Leisure sector will feel the squeeze. PSD’s Flemming Hansen considers the effect of the National Living Wage on the Hospitality and Leisure Sector.