Salons should use Employment Allowance to ease ‘pain’ of Living Wage

Hairdressers and barbers are worried about what Wednesday’s announcement of a new National Living Wage is going to cost when it launches next April.

But the NHBF is advising members not to assume the change will be all negative, or to overlook other changes announced in the Budget that should benefit small salons.

First, salons should recognise the new wage – which will start at £7.20 an hour from April 2016 and will rise to £9 an hour by 2020 – will just be for employees aged over 25.

This means it will normally apply to a salon’s more experienced stylists, who should be running busy columns and bringing in a good income for the salon. Those who are rewarded for hitting their targets with bonuses or commission structures  are already more likely  to be earning above the minimum wage, which will  limit the impact of the introduction of the National Living Wage.

Salons should also note the increase to the Employment Allowance, which allows small employers to reduce the amount of National Insurance they pay for their employees.

The allowance will rise by 50% from £2,000 to £3,000 from 2016, a move specifically designed to help small firms offset some of the increased cost of the National Living Wage. However salons where the owner is the sole employee will now not be able to claim the allowance at all.

NHBF president Paul Curry said:

“The chancellor made the point in his speech that this change to the Employment Allowance will mean a business employing four people full-time on the new National Living Wage will not have to pay any National Insurance contributions.”

The chancellor also announced that corporation tax will reduce from 20% to 18% by 2020, a change that will benefit the bottom line of many small businesses.

Mr Osborne’s commitment to introduce legislation to rule out increases in income tax, VAT or National Insurance over the course of the current Parliament also provides welcome clarity for small firms.

Paul Curry said: “Salons should recognise the Budget was wide-ranging in what it covered, and there was good news in it as well as bad. But the NHBF will continue to fight the industry’s corner, especially on wages, to ensure its voice continues to be heard loudly.”