Manchester, UK.
Delivering on one of their main manifesto commitments, the Labour Government yesterday announced two major changes to how the national minimum wage is set.
The Low Pay Commission (LPC) has been ordered to factor in the cost of living when deciding the rates of the minimum wage and national living wage, as well as ‘narrowing the gap’ between the minimum wage rate for 18-20-year-olds and the national living wage.
Commenting on the changes, Lucy Cobb, Advice Operations Manager at BrightHR, said, “We’ve known for a while that Labour plans to abolish national minimum wage (NMW) age bandings and move towards a single living wage rate for all adult workers.
“What yesterday’s announcement shows is that the Government is not resting on its laurels in making this ambition a reality. Through this announcement, Sir Keir Starmer has made it clear that Labour’s plan to improve living standards and ‘make working pay’, for young people in particular, is a top priority for his government.
“The impact on small businesses in the UK will be significant, especially for those in the retail and hospitality sectors, which often rely on a young labour force to keep costs down. Now that the LPC has been ordered to account for the cost of living when making recommendations to the Government on the minimum wage, wage costs for 18-20-year-old workers are likely to increase considerably.
“Businesses may choose to look at their hiring and retention strategies to ensure the benefits of hiring younger workers outweigh the additional costs. However, should they choose to do this, they will need to be careful and avoid the possibility of discriminating against younger workers.
“Critically, businesses will also need to review their payroll processes to ensure that employee wage information is kept up-to-date. Fragmented processes could lead to unlawful wage deductions, legal fees, and enforcement by HMRC, highlighting the need for businesses to invest in an end-to-end payroll solution that provides a single source of truth across payroll, HR, and HMRC functions and can be easily updated to reflect changes to wage regulations.
“Pay is an emotional topic for everyone, and small businesses need to make sure they get it right. The first 100 days of the new Labour Government is particularly a pivotal time for business owners to keep abreast of legislative changes, not only to pay but also in other areas of employment law, and ensure they are proactively streamlining their operations to adapt to these effectively.”
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