National Living Wage_Header

Today the country has seen that the National Living Wage is set to increase for people aged 25 and over by 50p per hour to £7.20 – the plan is to rise to £9ph by 2020. Although this doesn’t seem like much, it is quite a significant increase. So significant that Nick Boles (Skills Minister) has claimed it is “one of the biggest increases in the legal minimum wage that any government has done in the western world in living memory”. Now that we have your attention we can look at this from both an employee and employer perspective and how this could have some huge implications on the future of both of these. Firstly, let’s look at this from an employee perspective.

National wage increase 2016


I bet your thinking woohoo I’m getting a pay rise! This is obviously a huge positive at first sight for employees, on an average working week of 40 hours, staff will be seeing an increase of £20 each week (before tax) and a whopping £1,040 per year.

Those missing out: Unfortunately, there will be a downside to the wage increase as some people could be missing out on this. Services, freelancers and the self-employed might still be earning less than the previous living wage, examples of these types of roles are gardeners, cleaners, labourers, dog-walkers and window cleaners. For these individuals it will be an important time for them to assess their prices and look to realign them with the updated cost of living.


As an employer this pay rise might seem quite worrying at first, but this is also a great opportunity to take an holistic view of your business and improve productivity. The wage increase will only affect employees that earn the minimum wage so this won’t affect all businesses. But if this does impact your business be sure to comply as you could be fined up to £20,000 per worker or banned from being a Company Director for up to 15 years.

The future impact of the rise: With this increased cost to businesses a lot of companies of all sizes are going to have to find the additional money from somewhere. The rise will greatly affect smaller businesses and they might think twice before hiring their next employee. Even the bigger industry players are going to have to brace themselves for this dramatic change and the employees might end up feeling the brunt of this in the near future, for example B&Q (which employs 27,000 staff) is planning to cut summer and Christmas bonuses and to scrap premiums for working Sundays and bank holidays. Employers will be looking to pass on the cost of the living wage and in many cases this could impact on the employee. Companies will need to streamline to accommodate this added cost.

Some employers that previously increased their salaries in line with National Living Wage have seen increases in productivity. With good management this change could help streamline and improve many businesses but it is definitely going to be a testing time for some industries such as Care, Manufacturing and Construction.

We can be certain that we will see an increase in unemployment over the following few years as an impact.

If the National Living Wage has impacted on your life as a business or as an employee? Share your thoughts in the comments section below.

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