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£1bn Living Wage cost shows government must stick to tax cut promises

15 Dec 2015

The Institute of Directors has urged the government to “come good” on its promise of tax cuts for employers after a new impact assessment showed that the National Living Wage, which comes into force next April, could cost private sector employers more than £1 billion.

Seamus Nevin, Head of Employment and Skills Policy at the IoD said:

“IoD members supported the introduction of the Chancellor’s living wage as part of a deal he made with business - lower taxes for higher wages.

“Worryingly, however, the Chancellor’s £1 billion living wage is not the only extra cost businesses have been hit with. A new payroll tax, in the form of the apprenticeship levy, will cost employers £12 billion over the course of the parliament, while the next tranche of pensions auto-enrolment will affect the very smallest businesses. This is not to mention a number of significant additional reporting requirements firms will have to comply with. The cumulative effect of these will be considerable, particularly for those medium-sized businesses that just meet the threshold for compliance.

“It is imperative that the government now comes good on its promise of less red tape, fewer regulatory hurdles and a lower rate of corporation tax to help employers absorb these additional costs and raise pay.”

Nine in ten IoD members already pay the higher voluntary Living Wage rate to all of their staff members.

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