April 8th, 2016 | Sterling

Why the National Living Wage is an opportunity for HR

National Living Wage is an opportunity for HR

Why the National Living Wage is an opportunity for HR

The new, compulsory National Living Wage (NLW) was probably one of the most headline-grabbing announcements in George Osborne’s Budget last summer, and very recently became law on 1 April 2016.

Not to be confused with the National Minimum Wage – or the voluntary Living Wage for that matter – the NLW requires employers to pay workers aged 25 and over at least £7.20 an hour, although this figure is expected to rise each year, with a target set to reach over £9 an hour by 2020. The NLW is effectively a top-up for the over 25s, giving them an extra 50p based on the current National Minimum Wage of £6.70 for 21-25 year-olds.

As millions of UK employees are now eligible for a pay rise, many employers affected by the NLW are feeling the pressure and may be nervous about the increased costs to the business. Some will perhaps be considering cost-cutting measures such as reducing headcounts or raising prices to help relieve some of that pressure.

Think of the positives

While there is no denying that the NLW will have a huge impact on many organizations, it also presents a big opportunity for HR to step into the spotlight, show its strategic side and demonstrate that it doesn’t have to be all doom and gloom – in fact, there are even some positive ways to respond to the new law.

One such option is to get more out of your staff. A number of reports have suggested that employers are looking to increase productivity in response to rising salary costs. This includes research by the Resolution Foundation and the CIPD in 2015, which found that almost a third of employers hope to improve efficiency and productivity to help manage the cost implications, which, encouragingly, was the most common answer among respondents. Meanwhile, a government survey of 1,000 employers revealed that 88% believed the NLW will make staff more productive, 83% said it would increase loyalty, and 86% thought it would boost staff morale.

Writing recently about the NLW, Charles Cotton, performance and reward adviser at the CIPD, said: “HR has the chance to prove its value by looking at ways to reduce the potential negative consequences of higher costs by reviewing how working practices can be improved. Rather than treating the NLW as a threat, and responding in a kneejerk manner, employers should look at it as an opportunity, and start to systematically review how work is done and how productivity can be enhanced.”

That all sounds good, but where do I start?

There are a number of things that HR can do to review current working practices and drive productivity. First, it’s worth investing in training and development to ensure you have a multi-skilled workforce; and then make sure you give staff the opportunity to use those skills and perform to the best of their abilities. This, in turn, increases employee engagement and productivity, whilst enabling the business to achieve value for money from job roles.

Second, invest in new technologies that can automate and streamline processes. This could be, for example, self-service technology that reduces the admin burden on HR, which not only empowers staff to take control of such tasks, but frees up the HR function to focus on the more strategic initiatives, such as driving workforce productivity.

There are HR software applications now available that provide employees with tools that can, for instance, help them to collaborate with others, learn and develop, or guide their own careers, which all go a long way in driving staff engagement and empowerment.

Your background check platform is another technology which can help to significantly free up HR resources, by streamlining an important part of the hiring process whilst providing more reliable and consistent checks. At a time when employers may potentially be recruiting fewer people it is critical that every hire is on point – the cost of getting it wrong is simply too great.

HR teams can also collect and analyse workforce data, using any insights gained to inform engagement and productivity strategies. It’s really important for all members of the HR department to develop analytics skills, so that you can support decision-making and really understand your workforce – and give yourself the best chance in the quest to enhance productivity and efficiency in the business.

Lastly, you could even consider offering a bit more than the minimum rate, if you can afford it. With more money in their back pocket, employees may well feel happier, as well as more motivated and valued, which in turn boosts productivity and reduces turnover. Plus, being known as an employer who rewards hard-working people with a fair wage can help to differentiate your organisation in a tough, competitive market.

Whilst it’s still too early to tell what the exact impact of the NLW will be on employers, HR has an immediate opportunity to prove its worth, by demonstrating that the NLW can be seen as something positive for the whole organisation. So, if you haven’t done so already, now is the time for you to adapt, and focus on strategies that will drive productivity, increase output and enable your workforce to become more skilled, empowered, loyal and engaged.

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