Analysis

The National Living Wage: the story so far

By Emily Sutherland contact

- Last updated on GMT

Some operators are concerned higher wages will led to less training
Some operators are concerned higher wages will led to less training

Related tags: National living wage, Minimum wage

Chancellor George Osborne caught the industry off-guard earlier this year when he announced a new national living wage (NLW) of £7.20 per hour for workers aged 25 or over from April 2016, rising to £9 by 2020. Pub operators have been crunching the numbers to see how the policy will impact on labour costs and recruitment decisions.

With such an important and unexpected change facing the industry, the next MA300 business club event will host a panel session on dealing with the NLW, hearing from operators who already pay higher wages and the benefits they’ve seen, as well as discussing some of the sector’s wider concerns.

Are you interested in taking part in the debate to discuss your concerns about the living wage? Email the PMA’s​ deputy editor Mike Berry at zvxr.oreel@jeoz.pbz

Panellists will include BrewDog Bars managing director David McDowall, the Living Wage Foundation’s Amy Hulme, Truscott Arms owner Andrew Fishwick and ALMR chief executive Kate Nicholls.

Are you interested in taking part in the debate to discuss your concerns about the new living wage? Email the PMA’s​ deputy editor Mike Berry at zvxr.oreel@jeoz.pbz

Ahead of the event, the Publican’s Morning Advertiser​ takes a closer look at both sides of the debate so far.

“This will lead to higher prices, and more supermarket booze”

Wetherspoon’s boss Tim Martin was one of the first to publicly criticise the plans, arguing it will place further financial pressure on the industry and push prices up.

The Office for Budget Responsibility, an independent body that reports on the UK economy, estimated that the new NLW will see tens of thousands of people lose their jobs and four million fewer hours worked per week due to the added cost to employers.

Some pub operators, including JW Lees managing director William Lees-Jones, have said that paying staff the current minimum wage allows businesses to invest significantly more in training and employ extra people, rather than ‘cut staffing to the bone.’

Writing for the PMA​ he said: “The hospitality sector is hard work and the pay starts out basic but this is more than made up for by flexible hours, the opportunity to progress and the vicinity of the workplace to home.

“My prediction is the policy will lead to prices going up, more cheap supermarket booze, more companies employing those aged under 25 and the enforced retirement of colleagues who have slowed down a little.”   

For others, the unexpected timing of the announcement has been as big as a concern as the policy itself, arguing businesses have been given little time to adjust to increased wages. Martin described it as “decided by one or two politicians on a whim”.

His fears were shared by Timothy Taylor boss Tim Dewey, who told the PMA ​that while he supported the policy in theory, the Government’s ‘rushed’ approach meant they had failed to take account of the impact on businesses.

He said: “We’ve been working through the numbers here and it is quite a significant impact. People tend to focus on the rise in the minimum wage but if you’ve got somebody with extra responsibilities on a slightly higher wage than the minimum, they will want their wages to go up too. It actually has a knock on through the whole salary structure.”

ALMR chief executive Kate Nicholls is also among those concerned, pointing to the lack of consultation between government and businesses and the unusual step of making operators accommodate for an extra increase in wages halfway through a wage round.

Time to change perception pub sector is a stop-gap job

However, others have suggested that higher wages could be the sea change necessary to end the perception that the pub sector only provides stop-gap jobs. Operators already paying higher wages argue they’ve reaped the benefits in staff retention. Andrew Fishwick, who operates two sites in London’s Maida Vale, currently pays a minimum of £10 per hour and says it’s worth every penny.

“It costs on average £5,000 to recruit and train someone in any area of your business. That’s a vast amount of money that most people don’t realise they’re paying because it’s not an upfront cost. It seems hard to justify, especially when you’re first starting out, but 25% of the staff we started out with two-and-a-half years ago are still here.

"On average, we have a 60-70% ratio of retaining staff, and a big part of that is paying properly, as well as the other things we do like social responsibility and ensuring staff have a good work life balance.”

Speaking at the recent Forth Hospitality conference, multi-Publican Awards winner and Oakman Inns founder Peter Borg-Neal recently made an important point: “If you want engaged and motivated people they must be able to pay the rent.”

The Government has been accused in some quarters of not going far enough to improve the wages of low paid workers and disingenuously appropriating the term ‘living wage’ to dress up an increase in the minimum wage.

The living wage is calculated according to the ‘basic cost of living’, and the new rate set by the Chancellor is considerably less than the Living Wage Foundation’s benchmark, which puts it at £8.25 per hour, rising to £9.40 in London.

Are you a multi-site operator and interested in hearing more about the impact of the new national living wage? Email Joanne.Horton@wrbm.com to secure your place at the next free-to-attend MA300 event at Nottingham’s the Assembly Rooms, 27 January 2016. 

Related topics: Training, Legislation, MA Leaders Club

Related news

Show more