National Living Wage survey points to big costs

A survey of 1,037 employers shows that the higher wage floor will have its greatest impact in retail (79 per cent) and hospitality (77 per cent), where more than three-quarters of employers say their wage bill will be affected and around a third in each will be affected significantly.

Image: HW
Image: HW

Some 54 per cent of respondents said the NLW will have a material effect on their wage bill.

In response, three in 10 of those organisations affected are planning to recoup some or all of the extra cost by raising productivity, according to the survey by the Resolution Foundation and the CIPD, the professional body for personnel staff.

Conor D’Arcy, a policy analyst at the Resolution Foundation, said: "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."

The national living wage is due to take effect from 1 April 2016 and will push up the minimum hourly rate for workers aged 25 or older from £6.70 to £7.20.

The chancellor announced a compulsory national living wage will rise to £9 an hour by 2020. 

More than one in five employers planned to accept lower profits (22 per cent), 16 per cent said they would reduce overtime and bonuses, 15 per cent said they would raise prices, while 15 per cent said they would reduce the number of employees through redundancies or slower recruitment. Less than 10 per cent would slow pay growth, reduce hours or employ more uner 25s.

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