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Plans to introduce a living wage

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09/07/2015

 

Members of the UK200Group of independent chartered accountancy and law firms have commented on George Osborne’s plans to introduce a living wage as announced in yesterday’s Summer Budget.

During his statement, the Chancellor of the Exchequer announced that the Government would introduce a living wage that would see those over the age of 25 receive £7.20 an hour by next April, followed by an increase to £9 an hour by 2020. He said the measure would mean “two and a half million people will get a direct pay rise” and that the new living wage would represent “a cash increase for a full time worker of over £5,000.”

Jonathan Russell, partner at UK200Group member firm ReesRussell

We must all applaud the concept of the ‘living wage’, no doubt not called a new minimum wage so that the Government does not have to use this in its pledge to take people on the minimum wage out of tax! But it does not come without its problems – within an hour of the announcement I had one client email me to say they would seriously have to consider closing down as it will increase their wages bill by over £700,000.

They run care homes where the Government constantly tries to reduce the payments they make for such care, and in reality, unless the Government are prepared to increase fees by around 10 per cent to cover this extra cost then they will find it difficult to cover the additional expenditure. Care homes are not alone where wages are a very large proportion of operating costs and a significant number of employees are on or near the minimum wage.

John Painter, managing partner, UK200Group member firm CB Chartered Accountants

Last November I did a presentation on the living wage to the Worcestershire Diocesan Synod and worried then how certain industry groups (agriculture and leisure in particular) would be in a position to afford it. However there was the counter political argument that by paying the living wage many people and it was a large percentage, would be lifted out of the tax credit system.

SMEs have the burden of the costs of auto enrolment to face in the next year or two and this will mean a further addition to their costs. This could lead to increases in prices which will ultimately end up with the consumer. My concern is that businesses that refuse to accept the price increase from SMEs will either force the SMEs out of business or push them towards the black economy for workers.

The Chancellor will have balanced his books perhaps but I think we will be looking at a whole new way of structuring the smaller businesses.

David Whiscombe, director of tax at UK200Group member firm BKL

It’s about fairness. It simply isn’t reasonable for employers, regardless of size, to pay an employee less than a living wage and rely on taxpayers to top up the wage packet. In-work benefits must go hand in hand with a requirement to pay a living wage if a welfare dependency culture is to be avoided.

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Established in 1986, UK200Group is the leading mutual professional association in the UK with some 150 offices of quality-assured member accountancy and lawyer firms throughout the UK totalling over 550 partners, 150,000 business clients and global links in nearly 70 countries. UK200Group provide services and products that are designed to enhance the business performance of its members.  Telephone 01252 401050, email admin@uk200group.co.uk or visit www.uk200group.co.uk 

 Disclaimer:

UK200Group is an association of separate and independently owned and managed accountancy firms and lawyer firms. UK200Group does not provide client services and it does not accept responsibility or liability for the acts or omissions of its members.  Likewise, the members of UK200Group are separate and independent legal entities, and as such each has no responsibility or liability for the acts or omissions of other members.


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