Chancellor George Osborne has warned businesses on cutting staff perks and overtime pay rates to cover the costs of the national living wage (NLW).

The chancellor was responding to reports on employers taking action to fund NLW including reducing overtime rates, lunch breaks and removing staff discounts.

Speaking on ITV’s The Agenda, Osborne stated that employers should be “more careful about their reputation and much more aware of their social responsibility to their workforce.”

The NLW came into force on 1 April 2016, setting the new wage of £7.20 an hour for workers aged 25 and over.

Charles Cotton, performance and reward adviser at the CIPD, said he had sympathy for employers struggling to meet the new NLW, especially smaller companies:

“This was sort of sprung on employers – they only had about 12 months to prepare, and it’s an additional cost on top of the apprenticeship levy and auto-enrolment. I would have liked to have seen some form of government help to manage the costs, especially for smaller firms.”

However, Cotton added that with wages reaching up to £9 by 2020, all employers should “start seeing staff payroll as an investment rather than a cost. Axing benefits that enjoyed low-take up and focusing on productivity would be a more sustainable way to address cost issues.”