During September, chancellor Sajid Javid announced plans to raise the minimum wage over the next five years to the highest level in the developed world.
In his speech at the Conservatory Party Conference, he not only pledged to raise the National Living Wage (NLW) to £10.50, but also said he would lower the qualifying age for the NLW from 25 to 21.
The main minimum wage rate for workers aged 25 and over rose to £8.21 an hour in April, and at this level is already one of the highest among large industrialised countries.
The chancellor was unable to say how much the proposal would cost business, or how much it would add to the public sector pay bill.
Raising the minimum wage to £10.50 an hour by the middle of the next decade would imply a full-time adult worker would receive £1,400 a year more compared to previous plans – making it imperative to involve the Low Pay Commission closely in monitoring the effects on employment.
Business lobby groups were quick to caution that raising the minimum wage to levels not seen in other developed countries needed more evidence, and additional time for companies to adjust.
Adam Marshall, director-general of the British Chambers of Commerce, said: “Companies already face significant cumulative employment costs . . . so government must take action to alleviate the heavy cost-burden facing firms, or risk denting productivity and competitiveness.”
So far, public and private-sector bodies have been able to adjust to higher minimum wage costs without significant negative effects on employment, but some worry that their ability to absorb further increases could be tested by a Brexit-related economic slowdown.
For help with any of your accounting or business advisory needs please contact Stack & Jones Accountants on 01869 277973 for a free 1-hour consultation.
Sources: Financial Times
Image source: unsplash.com