How much can you afford to pay to retain good staff?
We all know that we should value our employees and one way we can do that is to pay them a fair wage for a fair days work. However, as a micro-SME, how much can you afford to pay to retain good staff?
The National Minimum Wage (NMW) was introduced by the Labour Government in April 1999 and at the time some 1.9 million people were believed to be paid below the proposed rate of £3.60 per hour (employees of 21+). The hourly rate has largely increased over the 16years since its introduction and now sits at £6.50 per hour. During the run up to the implementation there was opposition from businesses, the Conservative Party and many economist, however since then it has become the norm that not many businesses even consider it an issue. The proposed increase to £6.70 that comes in to fruition on 1 October 2015 will probably go unnoticed by many.
Many employers may not know that the NMW is being replaced in April 2016 by the National Living Wage (NLW) for employees of 25+ years of age. Under 25 the NMW will still apply. There are two levels of NLW, London and outside of London.
What does it mean for you as the employer? Well, it means an increase in your employee costs which affects your bottom line (Net profit), which for some companies this just means a decrease in their profits and their Corporation tax bill if they are a company or in their self-assessment tax return if they are a sole trader. Some independent studies have suggested that the NLW will enhance the quality of work that an employee’s give and in some test cases absenteeism has fallen by as much as 25% as employees feel that they are valued and appreciated much more.
But what does it mean if you are a new business, with a tight cash-flow and little capacity to increase the wages of your employees? Is it time to re-evaluate the number of employees you have? Is it time to raise your prices? Or do you feel that you could no longer afford to trade and merely close the doors? The answer is all three: you should re-evaluate all aspects of your financials throughout the year and not just when legislation throws you a curveball.
By engaging SeaMount Business Services to manage and look after your financials and by us producing regular Management Accounts we can help you plan for all eventualities and assist in any decision making, before it is a crunch time situation.
To read more about the National Living Wage CLICK here or for the latest National Minimum Wage rates, CLICK here.
– Kath Hiscock, Director of Client Services
p.s. We have made the strategic decision to increase our wages in line with the NLW from October, as we value our employees that much, but we could only have made this decision because we look at and plan our financials on a regular basis. It’s about time you did too….
To contact us for more information, CLICK here.