Recently, it has been announced that the National Living Wage and National Minimum Wage are both set to rise in the April of 2022. As a consequence, this has had a knock-on effect on the Real Living Wage, which has now been raised to £9.90 for over 300,000 employees, whose employers are part of the scheme.
Many younger workers have welcomed the pay rise, as it offers better financial security for those living on minimum wage, which was a group greatly affected by the coronavirus pandemic. However, the pay rise has been criticised by some, as they believe it is meaningless due to a number of tax increases.
So, what does the rise in minimum and living wages equate to for small businesses?
First of all, it could heavily impact small businesses, which are reliant on students or part-time seasonal employees, who support companies in the retail, tourism, and hospitality sectors during the busier holiday periods. The rise in wages will inflate business costs, eating into profits, when many businesses are still recovering from the damage caused by the pandemic.
Graduates are set to benefit most from the wage increase. Therefore, businesses that were previously aided by the knowledge of recently graduated professionals may find themselves cut off from hiring affordable, skilled workers, as they may opt to instead work with companies supporting the National Living Wage.
It could cause small businesses to operate with fewer members of staff, limit opening hours, or move to part-time contracts. Employers may also need to adapt their seasonal employment plans, changing the hiring process, so that they take on younger, unskilled workers and train them up, rather than paying the higher staff costs for older employees.
However, the wage increase may result in extra spending, especially amongst younger professionals, who, as research has shown, are on board with ‘shopping small’ and ‘buying loyal’. Young spenders with increased disposable income could be advantageous for UK SMEs, particularly those with an online presence and that meet important customer values, like community involvement and sustainability.
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