December 4, 2024

The importance of the National Living Wage

Eumar Technology and our sister company Ubersorb became part of the real National Living Wage movement in 2021. We continue to be a major part of the jigsaw towards an empowered and enabled workforce at both companies.

However, while the National Living Wage (NLW) is an essential part in our armoury to empower – other companies continue to tell a story of the NLW as a challenge and something to endure. Naturally in all experiences there are lessons to be learned. We have found it to be a hugely significant tool to recognise colleagues’ contribution, but we have also needed to address many of the challenges other SMEs have found in implementing it.

Clearly, the National Living Wage (NLW) plays a significant role in the UK’s small business landscape, affecting both employers and employees. Now nearing its 10th anniversary, the NLW presents both challenges and opportunities for SMEs. The financial impact is notable, with many naturally experiencing increased wage bills. According to the Carnegie UK Trust, 40% of small businesses reported that the NLW increase affected their wage costs. In sectors such as our own, manufacturing, and others such as hospitality and retail that operate on tight margins, that wage increase is difficult to adopt.

But the NLW also offers potential benefits if delivered right. Higher wages can lead to improved employee motivation and productivity, resulting in a more engaged workforce, a benefit we continue to experience. At both Eumar Technology and Ubersorb, the NLW has contributed to better staff retention and, feedback would suggest, an increased sense of value. But obviously it is not plain sailing, and we continue to learn from others and their experiences; because with every increase in the wage, comes a new set of barriers to overcome.

As an SME manufacturing and R&D business, the implementation of the NLW required careful planning and adaptation to embed it effectively. Peer organisations also share implementation strategies to offset the increased costs and hurdles to implementation. These are just a few examples of lessons learned:

• Forecasting and budgeting: It sounds obvious, but updating financial projections to account for the wage increases is important. Plus, are there seasonal peaks and troughs in demand that can be ironed out to benefit employee working patterns and employer cost control.
• Cost control: There is a natural cost increase so it is essential to identify potential savings in other areas of the business which should, in time, minimise impact.
• Don’t waste the opportunity: The NLW and its National Minimum Wage (NMW) partner are investments in the workforce, but they should not sit alone. Underpin that cost with a focus on a positive workplace culture and learning and development. The cost of recruitment and training new staff is not insignificant.
• Stay up to date: Obviously compliance with the NLW and NMW is not optional. Failure to pay the correct rates can result in significant penalties and many have fallen foul of that. It is easy to miss as small business owners balancing many priorities so we must ensure we stay informed about the current rates and any planned increases.
• Offer real life practical solutions: We are administering our own cycle to work scheme to avoid incurring third party charges, keeping that money within the company. I am sure we can put those funds to good use. Also, we are offering budgeting help for anyone who would like assistance, on a friend rather than employer basis and a save as you earn Christmas thrift club.

The impact of the NLW extends beyond individual businesses. It plays a role in addressing income inequality and can contribute to increased consumer spending power. For small businesses, this could translate to higher demand for goods and services in the local economy.

While the NLW presents challenges, particularly for businesses in low-wage sectors, it also encourages innovation and adaptation. Small business owners who proactively plan for wage increases and focus on improving overall business efficiency are better positioned to navigate these changes successfully. That is our experience and those of senior management colleagues in other industries we talk to – the National Living and Minimum Wage platforms are a very positive thing.

So, if you still see it as a challenge, get in touch with us or reach out to your local business networks. There are things you can do to offset any negative impacts on your business and in turn, use it as an opportunity to improve or grow.