United Kingdom

Companies cutting employee benefits to fund National Living Wage should be 'named and shamed'

April 2016


Companies withdrawing employee benefits and reducing rates of pay in order to afford the newly-implemented National Living Wage should be 'publically shamed', Chancellor George Osborne has said.

His comments at the end of April came after MPs debated the issues around National Living Wage whilst it was revealed that several well-known companies such as Waitrose, Eat and B&Q were found to have withdrawn several benefits including free food, overtime and Sunday pay.

The National Living Wage which was introduced on April 1st entitles every employee over 25 to earn no less than £7.20 per hour. But concerns have been raised that businesses would struggle to increase base salary.

Speaking recently on ITV's The Agenda programme, Mr. Osborne said: "We will enforce the letter of the law but we want companies to also live by the spirit of the law... There are examples of companies that provided a free lunch and have cancelled it. I think they are being outed... They are being shamed into doing the right thing."

However, Charles Cotton, performance and reward adviser at the Chartered Institute of Personnel and Development acknowledged that many businesses – particularly smaller ones - would struggle to meet the increased salary rates especially as businesses were already budgeting around auto enrolment and the apprenticeship levy. Instead, companies should 'start seeing payroll as an investment rather than a cost,' he advised, and recommended that cutting benefits with low-take up and focusing anew on productivity levels would be a 'sustainable way' to tackle cost issues.

Jeff Fox, Principal at Aon Employee Benefits said: "By 2020 the Government have stated that they see the National Living Wage reaching a statutory limit of £9 per hour. This upward trajectory gives time for adequate planning but it will have implications. Affordability is key for both employer and employee alike but a reduction in benefit entitlement will inevitability impact engagement and is not the best answer. Employers should be reviewing their benefit strategy right now and make sure they take account of these additional costs in their decision making."



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