On the 1st of April, 2016, the UK government introduced an increase in the minimum wage for those aged 25 and over. This new National Living Wage means employees are paid 50p more every hour, increasing their pay to £7.20 per hour. It’s no surprise that for businesses, big and small, this has come as unwelcome news. Even the individuals who will receive an increased wage are growing concerned. The immediate benefits to their bank balance are being overshadowed by a dark cloud of headlines packed with warnings of the negative effects the National Living Wage may have on the economy.
The Centre for Retail Research has estimated that the increased wages will cost retailers £3.26 Billion per year in extra pay, and many of the big bosses have made their solution clear – to offset these costs by passing them on to workers and consumers. From cutting staff perks, to reducing an estimated 900,000 jobs by 2025. Consumers are being told to wave goodbye to much-loved services, like free home delivery, and have been warned of increased prices from companies such as Costa.
However, we think it’s time to wake up, smell the coffee, and realise that upping the costs of cappuccinos and banishing bonuses is not the answer. Offsetting costs to consumers and workers may be quick and easy to implement, but it’s not an effective long-term solution. It is simply papering over the cracks. And, with the National Living Wage set to increase again to £9 an hour by 2020, the cracks won’t stay covered for long.
With over 20 years helping companies across industries thrive in the face of change, we are confident that there are alternative solutions. Business Improvement methods, such as Lean Six Sigma, make it possible to increase profitability with limited capital expenditure. Through these methods, companies can find permanent solutions that will benefit both the business, its employees and its customers.
Lee Iacocca once said,“We are continually faced by great opportunities brilliantly disguised as insoluble problems”. Businesses should begin to view the new National Living Wage as a great opportunity. A catalyst for change and improvement that forces us to become as efficient and effective as possible, with the resources we already have. Such changes will create a united and adaptable company culture, that can thrive in an ever-changing economy. Plus, businesses that look for innovative solutions that do not punish staff or consumers are likely to be rewarded with increased loyalty.