A number of employment law changes come into effect this month which include the introduction of the new National Living Wage as well as an increase to National Minimum Wage rates as of today. Compensation limits for redundancy pay and unfair dismissal claims will also increase from next week (6 April 2016).
When it comes to the National Living Wage, the problem for many employers is not the affordability of the basic wage, but the knock-on costs of overtime or night shifts. As a result, small businesses, from start-ups to generations-old bakers and butchers, are concerned about their ability to weather the change. What are their options for balancing their books?
The first option is simply to pay the new wage without further changes, attempting to turn higher salary costs into higher productivity.
A second option is to limit the use of overtime or move staff from night shifts to day shifts. However, this may limit employers’ ability to serve clients or grow the business.
A third option is to vary staff contracts, for example, reducing overtime rates from double time to 1.5 time. This is where the warning bells start ringing. Employers who want to vary contract terms such as overtime rates must follow strict legal procedures such as consultation with staff members. Failure to follow these procedures can lead to debilitating employment law disputes.
The options for each employer to deal with the National Living Wage are different, depending on their financial situation, longer-term prospects, and employee relations. If you want to change any contract terms, seek advice on what procedures to follow. The cost of this advice should invariably be cheaper than dealing with legal disputes.
