The New National Living Wage: Doing More with Less
Blog: Kofax - Smart Process automation
The Government’s new National Living Wage (NLW) is now law. What this means is that employees aged 25 and over are now legally entitled to at least £7.20 per hour. That’s an extra fifty pence per hour. Fifty pence might seem like an insignificant sum, but even such an amount could still pose a threat to any business that is unprepared for NLW.
In a survey of 500 business, Ipsos Mori found that 35 percent of businesses said the living wage had increased their salary costs. And businesses will have to find a way to finance extra wage costs over the coming years to meet the Government’s proposed NLW target of £9 per hour.
This makes it vital for decision-makers to act now and adapt their business models accordingly. A rising wage bill means businesses need to either increase profits or decrease losses to stay on track. While certain companies have chosen to raise prices, others have cut pay. Neither option is ideal when one leads to frustrated customers and the other to disgruntled staff. One way to offset the problem is for businesses to ensure they are doing everything they can to increase efficiency, but new research from Lexmark demonstrates that UK companies are not currently doing enough to absorb the potential impact of the new law.
The research, titled Impact of the Living Wage: Business Challenges, asked business leaders about the impact of the NLW and the steps they are taking to mitigate its effects. While employers may thus far have been able to absorb the additional costs in higher prices and lower profits, in future they will have to find ways to boost productivity in line with higher wages. However, the research found that only one-third (33 percent) of survey participants have plans to improve processes and increase staff productivity.
There are multiple potential reasons for this. One finding suggests that many businesses are playing down the significance of the perceived threat. Only a quarter of survey participants (25 percent) believed that their businesses will need to accomplish more with less budget and fewer resources. And only a quarter (25 percent) of participants believed the wage rise would require individual employee productivity to increase. In business, before you can solve a challenge, you need to first identify it. However, when it came to the need for greater efficiency, less than half of respondents in the survey believed that such a challenge even existed.
By not preparing for the additional costs, businesses are setting themselves challenges further down the road. The National Living Wage will require minimum wages for staff over 25 to be 60 percent of median earnings by 2020. It is almost 11 percent above the National Minimum Wage that applied prior to its introduction – and will give a pay rise to 1.3m workers this year, according to the Office for Budget Responsibility. In order to adjust to this change, businesses will have to do more with less. Workforces need to be leaner yet more efficient, which can be achieved but almost always requires improved employee productivity. Robotic Process Automation (RPA), a new and innovative approach that uses software robots to automate back office processes, is one technology that businesses can adopt to achieve this, and mitigate the additional costs imposed by NLW legislation.
Ensuring the right investment in back office automation is paramount to generating growth and productivity. And the benefits of automation are more than just cost savings. Other advantages include lower error rates, reduced risk, and higher productivity. RPA can also improve staff engagement by enabling employees to focus on higher-value tasks. Taking time to research the different options will pay off in the long term. Business owners who already have some form of back office automation may think they can retain their competitive edge, yet the introduction of the NLW will make a big difference. Examining what else could be automated can help reduce the administrative burden, simplify the processes and remove the heavy lifting. And automated software can help smaller businesses without an in-house HR team adapt to the new requirements by ensuring they are fully compliant with all the relevant legislation.
Smart businesses are already looking at these technologies, and while the primary objective is to improve productivity, the knock-on effect will lead to an enhanced customer experience. This is, without a doubt, a time of great upheaval for businesses of all sizes but with the right partners, it is a journey they don’t have to embark on alone.