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The Government has intimated that it may apply pressure on businesses that have reduced staff benefits, allegedly, to finance the National Living Wage “NLW”. Following widespread public outrage against B&Q, the Chancellor has warned businesses to be “careful about their reputation” and another minister urged MP’s to name and shame businesses offsetting the increase in the hourly rate of pay in a similar way.

The NLW was introduced on 1 April 2016 and is payable to all workers aged 25 and over. It is set to rise to £9 an hour by 2020 and funding this has caused concern amongst businesses, some of which are already struggling to meet the increase in staff costs prompted by the £7.20 rate.

Less than three weeks after its introduction, a Labour MP raised a motion in parliament which sought to persuade the Government to act to prevent employers changing the terms and conditions of their staff to offset the costs of the NLW. MP’s said that they had been contacted by workers employed by B&Q (and others) who said they were “significantly worse off” despite the increase to their hourly rate because of changes to their pay structure, shift allowances and bonuses. The Government was asked to issue penalties for employers who deliberately circumvent the NLW and to guarantee that no worker will be worse off as a result of its introduction. Whilst it is unlikely that the Government will accede to these demands (and in practice this would be extremely difficult to achieve without impacting on employers’ general rights to change terms) political pressure may be exerted on businesses who adopt similar practices. Indeed, the business minister, Nick Boles urged MP’s to notify the Government of businesses taking such measures so that pressure could be applied upon them.

There is no doubt that larger, well known brands, will face significant reputational damage if their workforces appear to be worse off despite, in many cases, a dramatic increase in their hourly rates. Senior executives at B&Q received public opprobrium and, shortly afterwards, they appeared to backtrack by announcing compensatory measures which they said would protect their staff’s income for two years. Other companies in the spotlight made similar announcements in an attempt to deflect the flack.

However, this problem is not going away. The pressure on businesses is likely to become more acute as the rates increase and we are likely to see other companies in the spotlight for all the wrong reasons. B&Q may also find that two years comes around rather quickly!

Employment Law Update - June 2016