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about 6 years ago by Eavanne Allen

National Living Wage: How will it affect UK businesses?


The National Living Wage announced in George Osborne’s budget in July 2015 requires employers to pay a minimum wage of £7.20 an hour to employees aged 25 and above. It will replace the previous £6.70 an hour minimum wage and the initiative will be enforced from 1st April 2016. 

The policy is expected to present challenges for employers in places where low-paid employees/workers are concentrated. In London, the total wage bill is expected to rise by 0.3% as a result of the national living wage, but in areas like Birmingham, there will be a 0.8% rise.

The bill will be introduced in several stages. According to the policy, organisations will be required to pay a minimum wage of £9/hour by 2020. The first increase will be introduced in April 2016, when workers will receive £7.20 an hour. 

  • The new National Living Wage will be applicable to those aged 25 and above. The law has been designed to secure work for younger people and maximise the opportunities available to them. 
  • It has been predicted by the Office of Budget Responsibility that about 60,000 people will lose their jobs because of the latest modification in the minimum wage policy. 

Businesses are already concerned about how the changes will affect them, however, according to George Osborne, 1.1 million will be created as a result of the overall budget, which would significantly overweigh the losses. 

It has been predicted that some employers will try to bypass the legislation by employing people that are younger than 25, or people that are self employed. Ambiguities surrounding the policy are predicted to affect UK businesses in a negative manner. In light of such strict controls, businesses may need to make tough decisions that could necessitate changes in contract, such as stopping or reducing bonus payments, cutting back on employee benefits and other incentives.