|Posted by Shaquille Pabani on December 9, 2015 at 10:55 AM|
First introduced in the UK in 1999, the National Minimum Wage (the NMW), and its potential impact on UK businesses prompted debate and divided opinions at the time. A decade and a half later, the debate has been reignited with the revelation of the National Living Wage (the NLW) announced to replace the NMW for workers aged 25 and over. The NLW will be initially set at £7.20 per hour in April 2016, with the government planning on ambitious wage growth to over £9.00 by 2020. These rates are not arbitrary, corresponding to 55% and 60% of the median salary for workers above 25 in the UK, in 2016 and 2020 respectively, according to the recent publication from the Resolution Foundation think tank “Taking up the oor, exploring the impact of the National Living Wage on employers” September 2015. Despite the obvious bene ts for employees, the UK labour market is bound to experience signi cant changes and employers are preparing for major challenges. According to the Of ce for Budget Responsibility, primary analysis estimates that 23% of the total UK workforce (c. 6m employees) will bene t from the NLW increase by 2020, leading to a £4.5bn total wage increase across the country. These numbers also re ect the additional cost of wage compression to maintain salary differentials and pay equity, as a large share of employees are currently paid just above the future NLW. Undoubtedly, the extent of the impact will be very uneven across sectors, as workforce characteristics and remuneration levels differ widely across industries. The vast majority of sectors covered by Christie + Co are not only labour intensive, but also highly dependent on low-paid labour. In their September 2015 publication, the Resolution Foundation commented that hospitality and social care are sectors where the impact is expected to be the highest, with total wages expected to increase by c. 2.5% on average. This analysis also shows that this measure will bene t one out of two employees in the hospitality sector (Restaurants, Hotels, Events Management, Catering, Pubs and Bars), despite a large proportion of this industry’s workforce being under 25. In the context of various debates taking place around the introduction of the NLW, we give our experts’ opinion on this key issue and share initial reactions from our business partners and key industry players. Our sector heads identify speci c challenges and opportunities in their respective sectors: Hotels, Pubs, Restaurants, Care, Childcare, Convenience Retail and Medical; as well as potential mitigating solutions. Our care sector head, Richard Lunn, also comments on whether the announcements of the joint 2015 Spending Review and Autumn Statement can compensate the care sector for the National Living Wage costs.