April 20, 2016

Chancellor warns companies not to ‘cut benefits’

George Osborne has this week warned companies that cutting staff benefits or perks in a way to combat the newly introduced National Living Wage.

From April this year, the government have introduced the National Living Wage which increases the minimum hourly pay to over 25’s to £7.20, an increase of 50p per hour.

The government fear that some companies may look to cut back on certain areas of their employee benefits package in order to pay for the increase in wages, however Mr Osborne warns that this will do significant reputational damage to their reputations.

Mr Osborne said that profitable companies that were trying to ‘evade the spirit’ of the new employment law would face significant government pressure.


What do we think?

The government has come out with the first warning shot on this at it clearly feels that many businesses will look to cut costs elsewhere so as to not increase their cost base…obviously not something the government sees as in the spirit if the new law, however Mr Osborne stopped short of saying that there would be financial penalties for companies that do this.

It is not always the case that employee benefits are guaranteed or written into the contract of employment so if it isn’t then some employers may look to make minor alterations or more likely, review their existing package in more detail.

In terms of reputational damage, it could certainly provide recruitment challenges if it’s seen that you are an employer that doesn’t look after its employees which could make it difficult to recruit that right quality of staff.

HR Heroes