Video: REBA New Year Lectures: Organisations underestimating the cost of the National Living Wage

The majority of companies are failing to take into account the full impact of the National Living Wage on their business, according to John Harding, partner in reward and employment at PWC.

View John Harding’s session ‘What does 2016 have in store for pay?’ by watching his presentation, above.

“Most organisations have underestimated the cost impact of this,” Harding said, speaking at the recent REBA New Year Lectures 2016. He urged businesses to do more to quantify the costs and also take into consideration the trickle-up effects of the new pay limits as different industries and pay levels seek to maintain their differentials from each other.

As well as quantifying the cost today Harding said many companies were also failing to take into account the full future impact on costs. Research by PWC shows that the likely cost for most organisations in 2020 will be between six to seven times what such companies have estimated in 2016, said Harding.

He said companies would fall into three camps – the deniers, budgeters and the adopters with the latter obviously proving the most successful. “They will realise the cost of labour will be far more expensive and start to do something about it,” he said.

Those that fail to take account of the changes face reputational risk since naming and shaming will happen. “Think about the increased level of governance and reputational risk and do some modelling early on. You have to think about the compliance issue because you don’t want to get caught out not paying because the impact on your reputation will be significant,” he said.

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