The Federation of Small Businesses is calling on small firms to make sure they act on National Living Wage legislation, introduced on Friday, to avoid heavy penalties.
The NLW is a new compulsory minimum wage of £7.20 per hour for the over 25s. The Government has set a target for the NLW to rise to the equivalent of 60% of average earnings by 2020. Based on the latest projections, this will mean the NLW could increase to about £9.15 per hour in 2020.
FSB believes the Low Pay Commission, the independent body that advises Government on the minimum wage, should be free to deviate from this target if it becomes apparent that the economy cannot afford it.
Mike Cherry, pictured, FSB National Chairman, said: “With the new National Living Wage coming into force this Friday, all employers have a legal duty to make sure they pay their staff the correct wage. Any small business owner who is unsure what they need to do should call our free member advice line without delay.
“Small businesses are playing their part by creating jobs and boosting pay packets wherever they can. Our research suggests that over half of small firms already pay their staff more than the voluntary Living Wage, but those that don’t are often operating in highly competitive sectors with very tight margins.
“While it is easy to say everyone deserves a pay rise, the only way to deliver and sustain higher wages in the long run is to improve productivity, boost skills and drive business growth. Without the right type of productivity growth, there is a real risk that in many sectors higher enforced statutory wages will lead to fewer jobs being created, fewer hours for existing staff and, unfortunately in some cases, job losses.
“It’s important that the independent Low Pay Commission continues to play a central role in setting minimum wages. This includes having the ability to recommend that the Government deviates from its plan to raise the National Living Wage to over £9 an hour by 2020, if it becomes apparent that the economy cannot afford it.”