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National Living Wage will have 'negative impact' on hiring, says FSB

09 Oct 2015

A survey released by the Federation of Small Businesses (FSB) has revealed that a significant amount of small firms are concerned about the potential impact that the new National Living Wage (NLW) will have on their businesses.

Of the firms that are likely to be negatively affected, some 50% said they would increase prices, while 52% reported that they would put off hiring new recruits to help offset the wage hike.

According to the FSB’s research, wholesale and retail companies, alongside food and accommodation services, are most likely to believe that the NLW will impact negatively on their business.

Additionally, firms located in the South West, Yorkshire, the West Midlands and Wales are amongst those most likely to foresee a negative impact.

Only 6% of companies thought that the policy would have a positive impact on their business when it is implemented next April.

Announced in the Chancellor’s July Budget, the NLW of £7.20 an hour comes into effect in April 2016 for workers over the age of 25.

Following the publication of the latest Cost of Employment Index, the FSB predicts that, for a small retail business with six full-time staff members aged 25 or over and earning the current minimum wage, the NLW will cost an additional £5,900 a year.

John Allan, national chairman of the FSB, stated that: ‘Over half of our members already pay their staff above the voluntary living wage, but those that don’t are often operating in highly competitive sectors with very tight margins.’

He concluded: ’With the economy recovering it is right that employees should be rewarded with a pay rise – but we cannot allow wage changes to become a political football.

’It’s important that the independent Low Pay Commission continues to play a central role in setting the minimum wage – and that includes deviating from the Government’s plan to raise the National Living Wage to over £9 an hour by 2020, if it becomes apparent that the economy cannot afford it.’