6 Ways to Prepare Your Business for the National Living Wage Increase
Like it or not, the Living Wage is heading our way. Now the genie is out of the bottle, it is pretty unlikely any of the major political parties will reverse the trend for a much higher minimum wage.
In April 2016, the UK minimum wage will increasing by 10% to £7.20. This is just the start. By 2020 it will be £9
Implementing a living wage will increase your overall payroll costs, potentially reduce your margins, impact your prices and open up issues around employee pay scales
Combined with auto enrolment and forthcoming interest rate rises, that’s a lot of cost for firms to absorb or pass on next year.
For some, passing these higher costs onto customers in price rises will mean relatively low price increases, compared to the overall cost of products and services. But in reality, efficiency savings will be the principle way you will protect your margins, such as reviewing work practices.
Research conducted to identify the ‘business benefits’ of implementing a living wage for employers by Strathclyde University for the Living Wage Foundation found evidence of reduced staff turnover, reduced absenteeism, reputational benefits, recruitment and retention of staff, worker morale, and productivity benefits – all being linked to organisations paying a living wage.
So now we have the necessity for you to review how you work, combined with the catalyst for your staff to change too. That’s quite an opportunity in my book.
Here are my 6 steps you should start investing time in now, to make sure you get the most from the National Living Wage opportunity, for you, your business and your staff.
1. Review your process and work flows
Activities that add no real value to the work can, and should be, eliminated or reduced to maximise efficiencies.
2. Find causes of lost time or down time
With recent surveys showing 89% of employees admitting to wasting time during their working day, there is plenty of slack in the system, and you don’t want to be paying for that. Tighten up on policies about using personal mobile phone/social media/tea break in the work place, and plan more work in their task lists.
3. Preventative maintenance for maximum output
In a workshop or factory, are your preventative maintenance plans being managed effectively to make sure your production capacity is at its optimum. Achieve better output using the same human resource.
4. Cross Train & Up skill Staff
Carry out a skills audit, and ensure all your staff are trained to their best capacities. A little investment in up skilling staff could save you a lot of additional salaries in the future as you make your employees more flexible across the work place.
5. Maximise value of existing clients
Uncover hidden gold in your customer database. (80/20 & marketing). Build on your relationships with that 20% of your customer base providing 80% of your turnover.
6. Price Reviews for added value products or services
Increase prices or add fees related to NEW services product features. The supermarket secrets of reducing weight but maintaining price – remember the 1 litre ice-cream tubs, that now cost the same but weigh 900g – that’s a 10% price increase neatly hidden on the bottom label. Not everyone has to be quite as surreptitious as that but if you add extra value to your products and services, without the need to recruit additional resource, then clients should be happy to pay for that. Look for ways of shaping your product offering to improve the return.
The bottom line is, if you take action to maintain your profitability now, you can earn market share while your competitors bleed cash.
Don’t wait until the national living wage increases your cost base. Download my guide today.
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