From next April, workers aged over 25 will be entitled to a ‘national living wage’ of £7.20 an hour, rising to £9 an hour by 2020.
Meanwhile, Employment Allowance will increase by a further £1,000 to £3,000. Businesses will have their employer National Insurance bill cut by another £1,000 from April 2016, as the Employment Allowance rises from £2,000 to £3,000. This means, next year, businesses will be able to employ four people full time on the National Living Wage and pay no National Insurance at all.
The Employment Allowance will only allow employers (who are currently paying minimum wage) to offset the cost of the Living Wage increases up to 2,000 hours. After that, the business will be a net loser unless it is profitable enough to benefit from the reduction in the rate of corporation tax.
Here’s what a few of the business community think of the initiative.