Earlier this month we blogged about the National Living Wage (“NLW”), which is expected to come into force in April 2016 for all workers aged 25 and above. Minimum hourly pay for those workers will increase from £6.70 to £7.20 and it’s envisaged that the NLW will increase over the coming years to reach a target of £9.00 per hour by 2020.
Results of a survey by the CIPD and the Resolution Foundation suggest that the retail and hospitality sectors will be hardest hit by the hike. The survey questioned 1,037 employers and found that over three-quarters of employers in retail and hospitality say their wage bill will be affected and around a third in each sector expect to be affected significantly.
According to The Guardian newspaper, a number of affected organisations are hoping to recoup the extra cost by raising productivity. The paper quotes Conor D’Arcy, a policy analyst at the Resolution Foundation as saying: “It’s encouraging that so many firms say that they’ll respond to the new higher wage floor by improving efficiency. But actually delivering this will prove challenging in many sectors, and it’s important that firms are given the necessary support to boost productivity.”
In the public sector, organisations are much less likely to be able to absorb the additional cost of the NLW through a rise in productivity. Employers in the healthcare sector are expected to be particularly vulnerable and, overall, one in five public sector organisations are reported to have said that they plan to make bigger cuts in staff numbers than previously planned.
Mark Beatson, chief economist at the CIPD, called on the government to help the care sector through enhanced business support or special help, rather than shaving small amounts off general business taxation.