The trade has been left stunned by the announcement of a new compulsory living wage in last week’s Budget. Many were expecting a relatively uncontroversial set of measures following the decision from trade bodies not to lobby for a further cut in alcohol duties. That proved not to be the case.
With research last week showing that the current average hourly wage in pubs and restaurants stands at £6.75, thousands of pub businesses are now facing a 6.6% hike in just nine months to reach the mandatory rate of £7.20.
The Government has made some efforts to sweeten the deal for small businesses by increasing the national insurance (NI) employment allowance from £2,000 to £3,000 a year. In practice, this means a business can now employ four full-time employees without paying NI.
However, Association of Licensed Multiple Retailers (ALMR) chief executive Kate Nicholls expressed reservations about the lack of input from businesses in developing the new wage policy.
“The big concern is that this has been done without any consultation or dialogue between businesses on how this will be managed or assessed. Increases to the national minimum wage (NMW) are announced well in advance with employers used to the current cycle of October changes. This new development will mean businesses must accommodate an extra increase in April, halfway through a wage round.
“This decision has been taken without recommendation from the Low Pay Commission and it is vital that any decision to implement and raise a living wage be subjected to the same scrutiny as decisions regarding the NMW. Having a higher hourly rate benefits no one if it is at the expense of a job.”
City analysts have also suggested pub companies will be those among hardest hit by the new policy.
But industry leaders have urged operators to see the positive impact higher wages could have on improving the sector’s image.
Readers’ reactions on social media
“I could pay the living wage if it weren’t for my VAT bill”
“Will tips be taken into account? My staff typically take home 30% of their wages in tips which puts them well over £9 an hour”
“This will put many independent operators out
“Sadly some pubs are still not paying their staff properly — ‘cash in hand’ is still rife”
Speaking to the PMA’s sister title M&C Allegra Foodservice, Oakman Inns chief executive Peter Borg-Neal said: “It will be a potential own goal, in image terms, if the industry responds in dreary negativity about these changes when the Perceptions Group is trying to lift our image as an attractive place in which to work.”
The policy received a cautious welcome from Perceptions Group chairman Keith Knowles, but he added it would do little to change the notion that hospitality jobs are no more than a stop-gap option.
“Nobody wants to be the champion of low pay. The increase will make no difference to the perception of the sector, as it will soon be seen as the new minimum wage. I call upon the Government to instead establish tax breaks for an agreed industry training programme,” he said.
Higher wages and an increase in the personal tax allowance should mean that many workers have more cash in their pockets, perhaps welcome news for pubs keen to attract customers out of their homes and spending in their venues. And the policy may mean on-trade businesses recruit more heavily from under-25s than before.
Barbara Smith, who runs award-winning Young’s lease the Grange, in Ealing, west London, said the hard work of bar staff needed to be recognised. Her employees join on the minimum wage but are then rewarded, based on their individual performance and expertise.
“It’s very important staff can afford to live. A happy team is one that works well, and higher wages can only be a good thing for them. They work very hard for their money and working in pubs has never been an easy option.”