Changes in pay legislation

As the new financial year gets underway, so does a whole raft of new pay legislation. Employers will need to action increases to Statutory Redundancy Pay, Statutory Sick Pay, Statutory Maternity/Adoption and Shared Parental Pay and the National Living Wage. This is good news for employees, of course, but it can pose a challenge for smaller business owners.

No-one would argue that a higher-than-inflation rise for the lowest paid workers is a bad thing. But for some businesses, it will come at a cost – as will the other statutory pay increases. Let’s remind ourselves of what’s changing.

*Known as National Minimum Wage (NMW)

For Statutory Redundancy Pay, employers must pay those with two years’ service or more an amount based on their weekly pay, length of service and age. The weekly cap is rising from £479 to £486.

All this is of course in addition to Gender Pay Reporting, which requires that employers with 250 employees or more publish figures showing any pay discrepancies between men and women on 5 April each year, starting with 05/04/2017 (based on a ‘snapshot’ on that date).

So how will changes to the National Living Wage (NLW) in particular affect businesses? Bigger companies that don’t already pay above the NLW (supermarkets, for example) will probably absorb the increase by improving processes, increasing productivity, introducing workforce redesign and possibly making job cuts. They may be able to pass the increase on to customers or reduce other employee benefits (such as bonuses or overtime pay). In other words, they have the assets, economies of scale and expertise to be able to find ways of tightening their belts.

For some smaller businesses, the picture is very different. SMEs are responsible for 60% of private sector employment in the UK. In truth, we know that not all will be affected by the NLW, but some will really feel it. Those likely to be hardest hit are smaller retailers, leisure/hospitality businesses, social care providers and farmers – those enterprises that pay low wages, and don’t have the commercial robustness to drive economies elsewhere or absorb the pain.

For such businesses, the impact could be catastrophic, unless they only employ a very small number of staff. If redundancies have to be made, who will cover the extra work? Care homes are hard-pressed already. Retailers face competition from online