National Living Wage – No Clear Evidence Of Negative Effects On Employment

Payroll Services BirminghamWhen the National Living Wage was announced employer’s groups were widely reported as saying that this would effect jobs. However, in a report from the Low Pay Commission (LPC) this does not appear to have happened.

The LPC provides recommendations to Government on what the rates of pay for the National Living Wage and National Minimum Wage should be. The LPC produces an annual report and one of the key findings in their 2018 report, was that there was no clear evidence of any negative effects on employment arising from the increase in National Living Wage which came into force in April 2018.

The LPC say that 5 million workers have received higher pay rises owing to the uplift in NLW. This equates to a fifth of workers aged 25 and over.  This takes into account a knock-on effect for the bottom 20% of earners, people earning less than £9 per hour.  The LPC says that these workers benefitted because employers maintained a gap between pay for different pay-grades or have made the decision to keep their pay levels above the NLW.  In total 1.6 million people were paid at or below the NLW. Two thirds of people paid the NLW were women.

The LPC went on to say that employers have adapted in order to meet the increase in the NLW. Measures employers have taken includes making less profit, passing on price increases to customers, restructuring their workforce and narrowing the gaps between pay bands. Other stakeholders were reported as saying that improving productivity will be important in order to manage future cost increases.

New increased levels for National Living Wage and National Minimum Wage will take effect on 1st April 2019. You will need to adjust your payroll management system accordingly.  Alternatively, please talk to our team at Payroll Masters based in Birmingham to outsource all your payroll management obligations including the increase in NLW.

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