Living wage hits foodservice hardest

THE NATIONAL Living Wage will add 3.6% to the wage bill of the foodservice sector by 2020. For hotels and accommodation the impact is 2.8%.

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Combined, this means hospitality’s wage bill will increase by 3.4% – twice that of any other industry and almost six times the national average (0.6%).


The findings are in a new Resolution Foundation report, which also shows that almost half (48%) of all hospitality workers will benefit from the NLW by the end of the decade, even though a large proportion of the workforce are under 25 and therefore not affected by the new policy.


Retail and support services will also come under pressure as wages rise. Micro-businesses – those with up to nine employees – will be hit much harder than large employers, with increases of 1.5% and 0.6% respectively.


Across the UK, around one in four workers are expected to benefit from the NLW ­– which will initially be set at £7.20 an hour in April 2016 before rising to over £9 by 2020. The total wage bill is set to increase by £1.5bn (0.2%) in April 2016, rising to £4.5bn (0.6%) in 2020.


The Foundation suggested that it’s not yet clear how businesses in the most affected areas will respond to the NLW. However, policy analyst Conor D’Arcy pointed to past evidence of modest price rises and efficiency gains to help weather increased labour costs. He said warnings of job losses often proved to be overstated.


“[…] whilst some may opt to reduce hours or new hires, past experience tells us that most absorb the pressures via some combination of small increases in prices, a dip in profits and productivity gains,” D’Arcy added.


Whitbread, which owns Premier Inn and Costa Coffee, admitted last week that it is planning to introduce some “selective price increases” in order to adjust to the NLW. Tim Martin, the founder of JD Wetherspoon, said recently that the NLW could force pubs to close.