This week Labour leader, Ed Miliband has announced his party’s plans to offer firms a 12-month tax break in 2016 if they agree to pay the so-called “living wage”.
The living wage is a non-statutory amount of basic pay deemed to be the amount an individual needs to earn to cover the basic costs of living. At the moment it is £8.55 an hour in London and £7.45 an hour in the rest of the UK.
This is higher than the statutory national minimum wage, which is only £6.31 an hour for adults, and £5.03 for those aged 18 to 21.
Under the proposals put forward by Mr. Miliband, Labour has proposed that private companies would be able to claim back about a third of the cost of raising their staff members’ wages to the living wage – amounting to £445 a year on average per worker, although it could potentially reach £1,000. However this can only be claimed back for one year.
The government said it encouraged employers to pay above the national minimum wage “when they are profitable and when it’s not at expense of jobs”.
Katja Hall, chief policy director for the Confederation of British Industry, said the scheme may help some firms pay more, but many companies simply could not afford it.
The Federation of Small Businesses said it was an “interesting proposition” but said a national insurance exemption next year could help firms increase pay sooner.
Many companies are already paying the living wage but if you would like help to review your pay structures to see how you too can manage to pay the living wage call our experienced pay and reward consultants now on 01506 828767.