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17.05.2016, 23:59

Offsetting the Living Wage Payroll Increase

Author: Vanquish – Integrated People Solutions

Transparency of workforce activity and costs delivered by Time & Attendance software can help organisations counteract the impact of the United Kingdom's new National Living Wage.

Transparency of workforce activity and costs delivered by Time & Attendance software can help organisations counteract the impact of the new National Living Wage. 

The new National Living Wage which became compulsory in the UK from April means organisations are now obliged to pay worker aged 25 and over at least £7.20 per hour, with the rate increasing to £9 per hour by 2020. The rate is 50p higher than the previous minimum wage of £6.70. 

It is anticipated that the new Living Wage will add approximately £11bn to the national wage bill. 

The reforms have been widely supported as it represents a significant increase in take-home pay for low paid workers. However, for employers that employ large numbers of hourly-paid workers on the minimum wage it signifies a dramatic increase in their payroll costs. 

In particular, companies operating in notoriously low margin sectors, such as contract cleaning, and those that rely heavily on low-paid staff seasonal staff, like hospitality and retail, are expected to feel the squeeze. 

Christian Berenger, Operations Director at Vanquish Integrated People Solutions, a leading developer of workforce management systems says: “Two months have now past since the launch of the new National Living Wage meaning organisations will have started to notice the increase in their payroll. 

“Confronted with rising costs organisations will react in a number of ways. Some will happily accept the change and pay more for their overheads, impacting their profitability in the process. Others will be forced to increase their costs, putting their customer relationships at risk, or reduce staffing levels in order to cut the overall wage bill and risk leaving themselves short staffed which could jeopardise service levels. 

“The key to embracing the National Living Wage positively is finding ways to take better control of labour costs and maximise workforce productivity.” 

Berenger points out that the payroll is every organisations largest controllable expense so there are immediate cost savings and efficiencies to be made if the workforce is managed accurately. 

He says: “Whilst the National Living Wage has drastically increased workforce costs, the reality is that many organisations are contributing to the situation themselves, blindly losing money every month because they rely on manual timesheets and clock cards to manage their workforce. 

“The problem with manual recording methods is that they are vulnerable to errors and abuse, such as time theft and workers clocking in and out for each other, not to mention being hugely labour intensive to calculate. 

“By investing in a Time and Attendance system organisations can gain a true insight into workforce costs, benefit from an accurate payroll process by eradicating fraudulent practices and release valuable admin time, all of which will result in bottom line savings and offset the impact of the Living Wage. 

“Removing inefficient processes means organisations are better equipped to offer workers better pay and stimulate future growth.”


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