Will NLW Make Employees the Victims?

Will NLW Make Employees the Victims?

National Living Wage could cause SMEs to make the low-skilled unemployed

By Phil Foster

Guest author, Phil Foster, heads up the SME Love Energy Savings, and as an employer with a close eye on his HR budget he has vested interested in the forthcoming introduction of the National Living Wage (NLW).

Here, Phil offers his thoughts on the impact the new initiative could have on numerous small businesses around the UK, and even counter the very reason it is being brought in by government – the bring about more security and stability through employment.

Creating unemployment

The NLW has been criticized by many small businesses for the burden it now places on them to retain staff and grow. While I completely empathize with the need to ensure workers have enough money to live on, the pressure this places on the 99% of SMEs that make up the business landscape in this country may mean there are fewer jobs available in the long run.

It won't be the case that businesses want to fire employees, but if they can't afford to keep them, this will happen, the skills gap in this country is already wide enough. Letting go of those low-skilled employees, who are most likely to be impacted, means that their chance to increase their work experience and grow will be affected, causing a long-term cycle of low-skilled unemployment which will not be rectified, especially if the NLW is planned for even further increases by 2020.

Demotivating younger employees?

Another issue that has been raised is the concern that younger workers will be exploited due to the NLW only applying to those workers over 25. Younger workers starting their career can often be the most driven, but would receiving a lower wage solely based on their age demotivate them and result in reduced productivity?

Not only may the younger generation feel under-valued, but the Department for Business, Innovation and Skills warned it may also reduce the likelihood of older employees leaving their job as a level of pay is secured, reducing opportunities for newer, younger applicants to take their place.

Workers could lose out

Therefore, it seems that the largest casualty of the NLW rise will be the workers themselves, which is at complete odds with the purpose of the proposal. Businesses that can't afford to pay workers higher wages may provide fewer opportunities – not out of a desire to, but out of practicality.

Ultimately, there are many issues that need to be tackled before the policy can be implemented, but it’ll be down to employers to manage their staff’s reaction through open communication and tactful responses.