A survey showed that 51% of operators in the service sector intended to raise prices to cope with the NLW while 27% planned to cut their workforce, 18% cut reward packages, 8% reduce hours and 2% leave the sector.
Across all sectors 34% of companies said they would pass on the pay rise through higher prices, 28% will employ fewer people and 19% say they plan to offset the changes through cuts to ‘wider reward packages’.
The annual survey of businesses found that more than two fifths (43%) of companies will grow their workforce next year, with permanent jobs outstripping temporary roles.
Carolyn Fairbairn, CBI Director-General, said : “Given the uncertainty surrounding the effects of the National Living Wage, it is critical that an independent, evidence-based Low Pay Commission plays the main role in assessing its true impact and recommending future rate rises accordingly.
“The Government must be careful not to sacrifice prosperity for political expediency by saddling businesses with costs that could harm investment, which is critical to increasing productivity.”