SMEs may struggle with the national living wage

The new National Living Wage was introduced last week. The Confederation of British Industry (CBI) has described it as the most significant labour market intervention since the National Minimum Wage.

CBI Deputy Director-General, policy and campaigns Josh Hardie said: “Companies are committed to raising prosperity and living standards – but for wage increases to be sustainable they must go hand-in-hand with productivity growth.

“If the National Living Wage (NLW) doesn’t get this balance right it will risk being unaffordable for many firms. Smaller businesses and those in key sectors like hospitality, retail and care are likely to be particularly affected.”

Hardie said that companies have been looking at their business models to manage the extra costs by reorganising the workforce, raising skills, improving leadership and management capacity and investing in new technologies. However, many may be forced to reduce hours and benefits.