The New Obligatory National Living Wage

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Introduction On the 1st April, 2016, the new obligatory National Living Wage (NLW) was set, rising from a minimum amount of £6.70 to £7.20 per hour – an hourly addition of 50 pence – only for those aged 25 and over. It was expected to benefit 1.8 million people and to provide an instant pay rise for approximately 6 million people across the UK. The target is that, by 2020, the NLW will increase to at least £9 an hour (BBC News, 2016)1. The aim of increasing the National Living Wage was “to create a higher-wage, lower-welfare economy.” (Osborne, G., 2016. Cited in BBC News, 2016)2. Since the rise of the NLW, it has been made evident that numerous businesses across the UK are being significantly impacted by this change, for instance, many…show more content…
The business was unable to pay the new NLW without reducing expenditure elsewhere, this reduction included cutting Sunday pay and bonuses, and reducing bank holiday pay. Therefore, whilst B&Q was increasing the minimum pay of their workers, they were also reducing their privileges, and so productivity and profitability both reduced. A solution to the issues caused by the increased NLW could be that B&Q alters their organisational objectives. Commentary There were a few main themes and ideas that recurred across most of the supporting documents (see appendices, p.6-X); one main theme is that it seems as though the NLW rise will benefit employees, when in fact several businesses, including B&Q, are finding ways, such as ‘cuts to employee benefits’ (Butler, S. 2016)3, in order to fund the increased NLW, and thus defeating one of the reasons for the new NLW’s enforcement, being to benefit the recipients, employees over 25 years of age. Another main theme is that the NLW will have future affects as well, due to the aim being for ‘the NLW to rise to more than £9 an hour by 2020’ and ‘the independent Office for Budget Responsibility has warned that 60,000 jobs could go as a result’ (BBC News, 2016)1. As they believe that ‘firms [will] recruit more under-25s, who will be on a lower rate.’ (BBC News, 2016)4. This issue of lack of revenue available to pay employees the new NLW, and other issues caused by the NLW rise
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