Increase in National Living Wage risks redundancies
Businesses are saying the April increase in the National Living Wage could increase the risk of redundancies. The hospitality and retail sectors have said they are already struggling to afford current wage bills and rising business rates. They also fear that the higher minimum wage will push up the wage bill across the board, as they try to maintain an appropriate wage differential.
By contrast, the minimum wage increase is welcome news for lower paid workers struggling with cost-of-living increases. And it is a significant increase, with the main hourly rate rising over 10% from £10.42 to £11.44. Additionally, this main rate now applies to all employees aged 21 and over, instead of the previous 23 and over. The youngest employees aged 16-17 see the highest increase of over 20%. See the table below for full details:
National Living Wage
| Age | 2023 | 2024 | £ increase | % increase |
|---|---|---|---|---|
| Over 23 | £10.42 | £11.44 | £1.02 | 9.80% |
| 21-22 | £10.18 | £11.44 | £1.26 | 12.40% |
| 18-20 | £7.49 | £8.60 | £1.11 | 14.80% |
| 16-17 | £5.28 | £6.40 | £1.12 | 21.20% |
| Apprentices | £5.28 | £6.40 | £1.12 | 21.20% |
Whilst the increase is welcomed by employees, businesses are concerned. And redundancies resulting from the increase would of course negatively impact employees.
Alternatives to redundancy
Businesses looking to avoid redundancies could consider alternatives, such as:
- Changing working patterns / flexible working
- Reducing hours across the board
- A reduction of services offered
- Freeze recruitment / natural wastage
- Redeploy and retrain to fill vacancies/ skills gaps
- Offer early retirement or voluntary redundancy
If redundancies are ultimately required, employers should seek early legal advice on the redundancy process. It needs careful preparation. A rushed and hurried process is more likely to end up with claims against you, For more information on how to avoid potential pitfalls, see our blog.
For advice and support on setting up an effective and fair redundancy process, contact one of our employment law specialists.