Article by Jamie Surman – Reward and Evaluation Director
The announcement yesterday of the national living wage increase to £11.44 per hour for employees over the age of 21 will mean a wage increase of at least 9.8% for up to 3 million people in the UK economy.
This has been followed up today with a range of measures, headlined by a 2% reduction in national insurance rates which will have the impact of elevating take home pay for the majority of the UK’s employees.
The new national living wage will have multiple impacts on workers, businesses and the economy as a whole. While it offers significant benefits such as improved quality of life, reduced income inequality, and increased consumer spending, careful consideration must be given to potential challenges faced by organisations that have employees at and above the national living wage.
Businesses over the past few years have seen employees pay at the lower end of wage structures increase significantly. This has had a “concertina” impact on differentials in pay.
The impact of national and real living wage (currently £12 outside of London) can also impact roles immediately above them in the organisations hierarchy. Wage “creep” for these roles is of major concern to organisations at a time of economic instability, with employee and business costs spiralling.
Businesses need to make informed decisions in striking a balance between fair compensation and economic sustainability which is essential to create an environment where workers thrive, and businesses can adapt and grow.
Now is the time to take stock and plan your wage structure development. It is essential for organisations to futureproof themselves through the creation of flexible options that meet your strategic vision and remain affordable whilst resonating with your people.
Here at Turning Point we have a wealth of experience that can help organisations develop proactive wage structures that can help balance legislative and business need. To find out how we can support you and your business get in touch here.