Retail and hospitality industry to be hit hard by new National Living Wage reform

All industries are going to be affected by the new National Living Wage reform. The hospitality sector in particular has always been very highly dependent on low-cost labour and businesses tend to work within tight profit margins. Therefore employers in the leisure and hospitality industry are likely to face increased pressure by the new National Living Wage reform that comes in later this year.

The National Living Wage supports the government’s vision of a higher wage, lower welfare, lower tax society. From 1 April 2016, workers in the UK aged over 25 earning the minimum rate of £6.70 per hour will see a 50p increase to £7.20 per hour. Although that is a step up for employees, it will be hard hitting for employers who are likely to face major financial challenges in the coming months.

The new National Living Wage will push up wages at more than half of all employers, forcing many of them to seek savings through improved productivity, according to a major survey by the Resolution Foundation and the CIPD (the professional body for personnel staff). The survey of 1,037 employers shows that the higher wage floor will have its greatest impact in retail (79%) and hospitality (77%), where over three-quarters of employers say their wage bill will be affected and around a third in each will be affected significantly.

Employers will need to consider carefully how they implement this change within their organisation, including assessing the knock-on effect it is likely to have in terms of their existing pay scales, job evaluation schemes, pension costs and other employee benefit schemes.

The proposals don’t stop this year and the National Living Wage is expected to rise to a projected £9.35 by 2020.

In addition to practical administration and payroll implications, as experts in the leisure and hospitality industry William Duncan + Co can offer clients advice with budgeting and forecasting to ensure their business stays ahead of the game.

For further information please contact Sandy Dargie or John Wallace.

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