National Living Wage increase from April 2020 – are you prepared?

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From 1 April 2020, the National Living Wage will increase by 6.2%, which is four times the rate of inflation. Businesses may wish to start looking at how they can incorporate the increase into their financial budget for the next tax year. Here’s what you need to know about the rise.


The main points

  • An annual pay rise of up to £930 for a full-time worker.
  • National Living Wage (NLW) increasing from £8.21 to £8.72.
  • New NLW rate starts on 1 April 2020 and applies to over 25 years olds.


3 million workers will benefit

Low-paid workers will receive a 6.2% pay rise, which the Government say is ‘the biggest cash increase ever’. Nearly 3 million low paid workers are set to benefit from the increase.

The new rate starts on 1 April 2020 and results in an increase of £930 over the year for a full-time worker on the National Living Wage.

Younger workers who receive the National Minimum Wage will also see their pay boosted with increases of between 4.6% and 6.5%, dependant on their age, with 21-24 year olds seeing a 6.5% increase from £7.70 to £8.20 an hour.


The impact on businesses

The Federation of Small Businesses (FSB) has concerns over the effect the increase could have on small businesses.

Craig Beaumont, FSB Director of External Affairs and Advocacy, said:

“Four in ten small employers say they will raise prices in response to an NLW increase of this magnitude. One in four say they will recruit fewer workers, one in five will cancel investment plans, and one in ten will consider redundancies.

There’s always a danger of being self-defeating in this space: wage increases aren’t much good to workers if prices rise, jobs are lost and there’s no impact on productivity because employers are forced to cut back on investing in tech, training and equipment.”


How to prepare

As a business, it is essential to update your financial forecasts to include these statutory increases to analyse what impact they may have on your business. Doing this now will give you time to make any necessary changes to your processes or sales forecasts to facilitate these future additional costs.


Further information

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