Living Wage announced: £7.20 for over 25s from 2016, increasing to £9.00 from 2020.
According to Peter Boreham, Principal in Mercer’s Talent business, “Many companies with lower-paid staff are already considering how best to ensure how to deliver a living wage. There are concerns that the proposed approach limits flexibility since the minimum is likely to focus on base earnings and not include bonuses or profit sharing payments. “While the move is broadly to be welcomed, the timing of this initiative is a little unhelpful.
Companies have already absorbed increases to the previous Minimum Wage over the last 5-6 years that have noticeably exceeded median market increases for other staff. They have also suffered cost increases on the back of the recent ruling that holiday pay should include overtime, and the introduction of pension auto-enrolment. Whilst the corporation tax reduction will help to fund the change, it may not be sufficient for companies with a high proportion of lower paid staff. Finally, there is a danger that this increase to fixed costs might damage employment if the economic environment becomes less benign or if competition from low wage economies and technology intensifies.
Executive Remuneration – Carried interest plans
According to Mr Boreham, ““The Chancellor announced that investment fund managers would be prevented from using tax loopholes to reduce the CGT paid on carried interest plans. These are structures that are often used in the remuneration of hedge fund and private equity managers. Despite these changes, we anticipate that such plans will still be more tax-favourable than the bonus plans and long-term incentives used in listed companies.”