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National Living Wage: How to prepare in 5 steps

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3. Manage costs better

Every business has controllable outlay. For services firms payroll is probably half of operating expenses. But not all are good at getting invoices out in a timely manner. There is technology that reduces lost and unbilled hours and inaccurate billing.

4. Improve staff retention

Losing workers to employee churn is a significant cost, particularly if recruitment agencies are needed to find replacements, The bill is bigger once training is included. Some estimates suggest that even an entry level employee can cost up to half their annual salary to replace. The figure for senior executives rises to 400 per cent.

It is important to keep staff at every level happy and motivated through a culture of decency, support and training programmes. A move to cut staff could damage morale and reduce commitment to the company at all levels.

5. Deliver a better service

Better pay means better employees and service to customers. Even a small retail outlet can look at developing all the customer interaction points which improve service and sales.

The pay rise next year for some six million UK workers is focusing attention on the main cost for most businesses, but also their main asset: Employees. The national living wage is above all a chance to get more out of that asset.

Tim Levey is head of business advisory, andKelly Roberts is head of human resourcesAt accountancy firm Kreston Reeves.

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