Ahead of the Autumn Budget earlier this week, Chancellor Rachel Reeves announced the NLW and NMW will both increase from April next year.
The NLW will increase to £12.71, a 4.1% uptick, while the rate for 18-to 20-year-olds will rise to £10.85, an increase of 8.5%. In total, it represents a £1.4bn hike in additional costs, according to UKHospitality (UKH).
It means business will have to pay a full-time worker on the NLW an additional £900 a year, rising to £1,500 for those on the NMW. National insurance contributions – for employers and employees – will remain unchanged.
Owner of Barr & Barr Hospitality Group, Rob Barr, estimated the wage hikes will add an extra £1,700 per employee to his wage bill, excluding pensions and NICS, totalling £59,500 a year in extra costs across his three pubs in Dorset and West Sussex.
Unviable costs
He told The Morning Advertiser (The MA): “I believe in paying team members a fair wage, but my concern is how aggressive this is being increased without any support for businesses.”
Additionally, he warned the jump in youth rate would discourage pubs from hiring young people: “An 8% rise in 18–20-year-olds is extremely damaging to a business like ours labour model. I believe in employing young people with no experience to give them the training, experience and confidence in their early professional years.
“But now, I’m sure like many, we will now think do we now take those young people on? The cost of training, mistakes, which we all need to make to learn from, support etc., is just becoming unviable.”
For the Red Lion & Sun in Highgate, north London, the increases represent a £23,000 jump in wage costs.
Licensee Heath Ball told The MA: “If I’m lucky to make 10% EBITDA I have to generate £230,000 more a year in sales just to stand still.
“The additional pressure is the freeze to tax thresholds. The Government made a big noise about being tough on minimum wage increases all the while dragging more low earners into paying more tax. It’s a shocking move.”
Extraordinary increases
Data from the Office for National Statistics (ONS) showed average weekly earnings in the accommodation and food services sector hit a record high of £357.05 in September, up from £346.52 the previous month and 6.4% year-on-year.
Barons managing director Clive Price warned the above inflation rises in wage costs announced this week would further fuel inflation for businesses and the wider supply chain.
“We are really disappointed to be shouldered with more wage rises,”, he added.
Owner of the Unruly Pig in Suffolk, Brendan Padfield, told The MA the sector was still reeling from last year’s increases.
He said: “It was bad enough the Chancellor killed growth through last year’s Budget with significant NMW increases and NI increases. Now we are faced with yet more extraordinary increases and consequential NI liabilities.
“The last Budget cost our sector dearly, resulting in large job losses - this Budget will do the same and more.”
