From Saturday, 1 April, the minimum pay for workers aged 25 and over rose by more than 4 per cent*. The National Living Wage increased from £7.20 to £7.50, meaning that a full time employee could earn approximately £600 more a year.
Business groups such as the Federation of Small Businesses (FSB) and the British Retail Consortium (BRC) have however raised concerns that businesses are set to face a sharp rise in costs, with many being underprepared.
The British Retail Consortium says: "It is important to recognise the significant additional costs associated with the policy. Our analysis shows that, across the retail industry as a whole, the National Living Wage costs up to £1.5bn to £3bn a year.
"Another uplift in the policy comes at a time of increasing competition, nearly four years of price deflation in shops and within an industry with very small profit margins. Therefore, it is important that future increases in the National Living Wage take account of wider economic conditions and are manageable for retailers."
In a statement, the FSB adds that SMEs typically absorb the cost of wage increases by taking lower profits and owners frequently pay themselves less or cease pension contributions to meet payroll obligations.
If you have any concerns about the cashflow of your business, our specialist advisers to SMES are available to assist. We can provide general business advice, structure your business for tax and assist with long and short-term forecasts, budgets, business plans, sensitivity analysis, and calculating and checking compliance with covenants.
Through our partner businesses, BM Structured Finance and BM Advisory, we can also source and restructure debt finance for SME businesses, as well as assist with resolving issues which can impact on business performance and success, and find innovative solutions for businesses and individuals in distress.
*Minimum wage rates for other age groups are available online here.