A client is concerned about how they will cope financially next year with the annual National Minimum Wage increases. Is it likely that the Government will introduce further measures to help businesses meet the rising costs? Or are there any other updates regarding this which can help the client?

It is unlikely that the Government will introduce measures to assist businesses in meeting rising cost or costs which are already in place with regards to the National Minimum Wage (NMW) and National Living Wage (NLW). However, a report by the Sunday Telegraph suggests that the Government may be considering scrapping the annual increase of the NMW and NLW next year – being referred to as an ‘emergency break’.

This is usually increased in April of every year with the year 2020 seeing the biggest increase thus far.

This news comes as the coronavirus’ impact on the financial stability of many businesses raises questions as to whether these businesses, such as your client’s, will be able to afford wage increases. It is likely, according to the newspaper, that Chancellor Rishi Sunak will be making the announcement in the upcoming Budget this Autumn.

In the fourth quarter of 2019, the Government pledged that it would increase the national wage to reach “60% of median earnings in the next four years.” However, the Low Pay Commission – an organisation which gives the Government advice on minimum wage uprating – has stated that the Government may have to withdraw from this plan in order to help businesses economically recover.

The Chair for the Low Pay Commission, Bryan Sanderson, has said that: “There are not many winners in today’s uncertain world. Our contribution to help steer a path through the complexity will be to provide a recommendation founded on rigorous research and competent analysis which has the support of academics and both sides of industry.”

On the other hand, the Trade Union Congress (TUC) has raised the point that an ‘emergency break’ would be the wrong move, especially for key workers who have not stopped working, even during the peak of the pandemic. Frances O’Grady, General Secretary of the TUC went further to say that rates should be increased to reflect the ‘real living wage’ – £10.75 per hour for those working in London, only being paid on a voluntary basis by approximately 6,000 organisations.

There is no doubt that your client’s business would be positively impacted if the Government were to implement this ‘emergency break’, as it will mean that compulsory pay rises will be less likely and organisations in financial difficulty will have less things to worry about and can focus on getting over the coronavirus hump. However, the TUC’s argument may be persuasive enough to dissuade the Government.

Despite this news, your client should keep in mind that, whilst many organisations have spoken on this issue since the news story broke on the morning of 7th September, the information has not come directly from the Government, or any of the Ministers within Parliament, so they need not rely on it. However, they can, and should, prepare for any possible outcome.

In association with Croner Taxwise

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