Wbg, one of Scotland’s leading independent specialist full-service accountancy firms, is advising employers to prepare robust budgets and undertake a review of their payroll in response to the hike in labour costs and the raft of Budget-linked tax increases that came into force this month.
This month saw the national living wage increase for everyone employed aged 21 and over, giving a pay rise of up to £1,400 over the course of a year, based on a 35-hour working week.
Under the 6.7% rise people will be paid £12.21 an hour. Full-time workers can expect to make on average £26 more a week, and £117 more a month.
And the national minimum wage –covering those aged 21 or under – will go up to £10 an hour for 18 to 20-year-olds, a 16.3% rise, and to £7.55 for 16 and 17-year-olds, an 18% increase.
Mark Mulholland, partner in Wbg’s Business Advisory department, noted that these rises in labour costs are well in excess of inflation and that, combined with increases in National Insurance, are placing a significant burden on businesses.
“To cope with this scenario, employers must have robust budgets in place because they need to know what these changes are costing them,” he said.
“Employers can’t afford to wait till the end of the month to discover the impact of these changes – they need to do their sums now and factor in the impact of this.”
Mulholland advises employers to invest in digital financial software.
“They need access to real time financial information,” he said.
“Making Tax Digital will soon be mandatory so employers need to have up to date software so they can know exactly what they need to spend on a regular basis because these increased labour costs will be a shock to the system.”
Noting that some employers may not know the changes being made to the national living wage, Mulholland suggests that they would be advised to undertake a review of their payroll to ensure that their employees are paid the correct minimum wage and are meeting their legal requirements.
“The last thing they want to do is to fall foul of HMRC because HMRC is not shy of naming and shaming employers that fail to meet their legal requirements.”
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