A new survey has suggested that the new National Living Wage, set to come into force in April 2016, is sending “shockwaves” through the labour market as employers seek to minimise extra costs.
The report from Manpower surveyed 2,101 employers and found that many were looking to scale back on recruitment over the next year, and were also looking to focus on younger people, as those under 25 will not qualify for the higher wage under the new system.
The new minimum wage of £7.20, dubbed the National Living Wage, was announced by George Osborne in July this year, and is set to come into effect in April 2016. Osborne has also said that he hopes the wage will rise to £9 an hour by 2020.
The report also found that the jobs market was worse in the North East, North West and Yorkshire and Humberside, all of which are sitting below the UK national average in the market.
The new wage level has come under dual criticism: firstly for being so high that it risks destabilising businesses ‒ especially those relying on a significant amount of low-wage workers, such as hospitality ‒ and secondly for being too low, because it still falls well short of the £7.85 living wage and the £9.15 London living wage as calculated by the Living Wage Foundation.
James Hick, a spokesman for Manpower, stated: “The national living wage is sending shockwaves through the UK labour market. An unintended consequence of its introduction is that firms might try to bypass the legislation altogether. We anticipate that some employers may look to mitigate the extra costs by taking on more young or self-employed workers, who are not entitled to the national living wage.”
The new wage has caused considerable debate within hospitality since it was introduced, with figures such as Hambleton Hall owner and hotelier Tim Hart suggesting to The Caterer that over-25s are likely to face discrimination and risk losing their jobs as employees seek to control costs.
Hospitality bodies across the industry have also warned of the impact the new wage may have, with the BHA stating that the announcement was not expected, and would now mean companies would be forced to factor the extra costs into already-existing business plans, with considerable impact.
Kate Nicholls, chief executive of the Association of Licensed Multiple Retailers, has also warned that the new wage could lead to job losses.
In contrast, some companies, such as CH&Co, have highlighted that the wage may benefit frontline teams and help to “retain great people”, while Oakman Inns and Restaurants chief executive Peter Borg-Neal, who claimed his company already pays at least £7.85 per hour, urged the industry to “stop whinging” about the wage, saying: “We need to talk more about the positive points about working in our sector.”
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