The Federation of Small Businesses (FSB) has issued a warning about the impact of the introduction of the new National Living Wage (NLW) on the ability of some SMEs to turn a profit.

Research, published by the FSB in September, found that the introduction of the NLW of £7.20 per hour in April 2016 had increased wage costs for 32 per cent of small businesses surveyed. Of those businesses whose wage costs had increased, 59 per cent said they had absorbed these costs through reduced profitability.

Mike Cherry, National Chairman at the FSB, said: “Small employers have stretched to meet the challenge set by the National Living Wage, with many paying their staff more by reducing operating margins. This will get harder for many firms in later years, with the targets set in a ‘pre-Brexit-decision’ economy.

“Considering the uncertain economic climate, the Low Pay Commission must be given the opportunity to adapt the target in future years so that it can be met without causing job losses or harming job creation.

“The rate of the National Living Wage should be set at a level the economy can afford, based upon economic and not political priorities.”

Milsted Langdon’s payroll bureau is able to assist with all wage, tax and National Insurance matters affecting individuals and businesses of all sizes.

Our experts can also advise on compliance with the National Living Wage legislation and its implications for your business.

Please contact our payroll team to find out how we can help.

Link: Small businesses stretch to meet the living wage challenge