UK businesses are facing a wage bill far higher than expected with the introduction of the National Living Wage, according to new research.
Moorepay analysed data from over 4,500 small and medium companies, finding that eligible employees will, on average, earn over £950 more each year.
With over 1.7 million employees set to benefit from the National Living Wage, the actual annual cost to the UK’s smaller firms will be more in the region of £1.67 billion, far higher than the business community was prepared for.
Despite the huge financial impact, Moorepay found that one in three SMEs are unaware that the National Living Wage comes into effect on April 1. An overwhelming majority (86%) had no insight into the impact this wage increase would have on their bottom line.
“Our research shows that many SMEs are apparently still unaware of the impending introduction of the National Living Wage,” said Alison Dodd, MD, Moorepay.
“What is more worrying is the number of companies that have little understanding of the financial impact this change will have on their business. It’s not just the higher wages bill that will affect their bottom line but the associated costs, such as national insurance, pension contributions and overtime pay,” she continued.
The HR solutions specialist says UK SMEs need to start planning long-term around this increase in wages and NI contributions if they don’t want to be caught out by it, adding that it is essential that businesses take stock to see who in their workforce will be eligible for the National Living Wage, not just on April 1st but also in the years to come.
With further plans to increase the National Living Wage to £9.00 per hour by 2020, the company advises SMEs to budget for a minimum increase of 45p per hour each year until the 2020 deadline in order to stay compliant.