Responding to the new National Living Wage

On April 1st 2016 a new living wage came into force, replacing the old national minimum wage. It significantly increased the UK’s low pay threshold with the aim of providing a better standard of living for people on basic wages.

Few businesses would question the validity of this policy, which will see the minimum pay rate for people aged over 25 climb from £7.20 an hour to more than £9 over the next four years. Many companies will be concerned about the impact this will have on their profitability, and may even question the long-term viability of their business model.
 
The penalties for non-payment are 200 percent of the amount owed unless the debt is settled within 14 days, and a maximum fine of £20,000 per worker. For many, the more serious impact of ignoring the rules could be a 15 year ban from being a company director.

Different sectors will see a variance of impact; individual employers may seek to redress this additional cost by a reduction in the provision of other work related benefits. This is of course contrary to the spirit of the initiative, and may well cause a company long-term reputational harm.

Implications for the print sector

If there was a national living wage ‘industry impact scale’, the graphic arts sector would fall somewhere in the middle. Printing and allied trades traditionally employ a broad range of skill sets. Undoubtedly most businesses within our sector will have to adjust their pay structure.
 
The good news is that the wide-format print industry in most cases has accepted this change and embraced it as a positive move, ensuring that all staff are fairly rewarded. Research from the latest Close Brothers Business Barometer reveals that the majority of organisations in your sector approve of the pay rise. Just over three quarters, or 77 percent, welcome it, while a significant minority of 27 percent also believe it will boost productivity.


Even in 2014, when the living wage was a relatively distant prospect, as many as 57 percent of those surveyed were in favour of the concept, despite the likely impact on the bottom line. It was felt that the money ‘lost’ through these increases would be returned through an energised and committed workforce.
 
Yet, the pressures associated with salaries remain. Wages are almost every company’s number one expense and consequently the biggest pressure on cashflow. Companies have a few options to alleviate the pressure, which unfortunately includes cutting headcount.

A more sustainable approach, how-ever, is restructuring your business finances to make the rise in costs easier to deal with. A great way to do this is through asset finance, which is where our team of experts at Close Brothers Asset Finance can help.

Asset finance helps businesses spread the cost of major purchases over their life cycle. The asset delivers the same value, but the cost of its acquisition is paid in stages as opposed to a significant one-off payment.
 
It relieves pressure on cash flow and frees up money to pay for other essential overheads, including machinery and equipment, managing complicated operations, client pitches, and, of course, wage increases.

Graphic Arts is a significant player in the UK economy and there can be no doubt that the increased wage demands will have an impact, but there are ways to mitigate the risks and still have a productive and successful business.




To find out more about the issues discussed in this article you can contact Close Brothers Asset Finance on 020 80030744 or visit www.closeasset.co.uk/print


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