A leading business organisation has today called for an increase in wages for low-paid workers but warned about the effect it could have on employers.

In its response to the Low Pay Commission Consultation, the British Chambers of Commerce (BCC) has recommended a 2.7 per cent rise in the National Living Wage (NLW) to compensate for the rise in inflation.

But the BCC has recommended a cautious approach to rises in the NLW to reflect the costs and pressures faced by employers and increasing uncertainty in the economy.

With firms facing mounting pressures from existing policies such as pensions auto-enrolment, the Apprenticeship Levy, and the Immigration Skills Charge, the BCC said many are struggling to absorb the rising cost of employment.

The latest rise in the NLW to £7.50 an hour increased wage bills further for businesses across a range of sectors, with the need to maintain wage differentials multiplying costs for employers.

Jane Gratton, head of business environment and skills policy at the BCC, said: "The BCC has recommended an increase in the National Living Wage to help low-paid workers manage inflationary pressures which are eroding their spending power.

"Setting the National Living Wage must be done cautiously, comprehensively taking into account economic circumstances, so that people are not priced out of jobs.

"The Government's current policy was set before the EU referendum and so does not reflect the uncertainty caused by Brexit.

"Businesses are facing high costs when it comes to employing staff - including the Apprenticeship Levy, pensions auto-enrolment and skills charges.

"The rise in the National Living Wage in April this year, brought a further increase in wage bills for business across a wide range of sectors, with the need to retain wage differentials multiplying their costs further."

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Readers' views:

Kieran O'Donoghue: This sounds like a half-baked comment for the British Chamber of Commerce to raise the National Living Wage.

For an organisation that's supposed to support businesses, a further drain on employer resources is exactly what this would amount to.

Nobody wants anyone in the UK to be living in poverty, especially when they are working, but shifting the burden entirely to employers with an arbitrary rise in the NLW is a lazy solution.

With Auto Enrolment contributions and Employers' Nation Insurance calculated as percentages, any NLW increases have a further indirect impact on employers' liabilities.

Let's also not forget that somebody earning the NLW and who is working over 30 hours per week is already up to their tax free earnings allowance, meaning for any increase in the NLW about 30 per cent will go to the Government in PAYE and NI.

To benefit the low-paid most efficiently whilst maintaining the ability of employers to meet their liabilities, an increase in the PAYE tax threshold is more sustainable solution that can be implemented in one fell swoop.